Preview
1
Lionel Z. Glancy
Michael Goldberg
Louis N. Boyarsky
(¹134180)
(¹188669)
(¹263379) SAR
PILED
MN'Ec COUNTY
GLANCY BINKOW & GOLDBERG LLP
3 1801 Avenue of the Stars, Suite 311 6ci'4 300
Los Angeles, CA 90067
Telephone: (310) 201-9150
Facsimile: (310) 201-9160 age
Email: info@glancylaw.corn
6
Attorneys for P/ainttffs
7
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN MATEO
10
EZRA NAVEH and RONI SALTON, On Case No.: CIV509114
11 Behalf of Themselves and All Others
Similarly Situated
12 AMENDED CLASS ACTION
Plaintiffs, COMPLAINTFOR BREACH OF
13
FIDUCIARYDUTY
14 vs.
15 AMIRBAS SAN-ESKENAZI, HARALD JURY TRIALDEMANDED
BRAUN, KEN GOLDMAN, DAVID
16 LOCKWOOD, MICHAELPOHL, EREZ
ROSEN, ROBERT SACHS, ROBERT C.
17
SMITH, GEOFF YANG, BIGBAND
18 NETWORKS, INC., ARRIS GROUP,
INC, and AMSTERDAMACQUISITION
SUB, INC.
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21
22
23
24
25
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27
AMENDED CLASS ACTION COMPLAINT
1 SUMMARYOF THE ACTION
2 Plaintiffs, by and through their attorneys, alleges upon information and belief, except for
3 his own acts, which are alleged on knowledge, the following against Defendants based upon,
4 among other things, a continuing investigation conducted by and through undersigned counsel
5 into the facts and circumstances alleged herein, including, without limitation, review and
6 analyses of: (i) thepublic filings of BigBand Networks, Inc, and ARRIS Group, Inc., with the
7 United States Securities and Exchange Commission ("SEC"); (ii) press releases, public
8 statements, news articles and other publications disseminated by or concerning BigBand
9 Networks, Inc. and related entities and the Proposed Transaction (defined below); and (iii)
10 Defendants'orporate websites.
11 1. This is a stockholder class action brought by Plaintiffs on behalf of holders of
12 common stock of BigBand Networks, Inc. ("BigBand" or the "Company" ) against BigBand,
13 ARRIS Group, Inc, ("ARRIS"), and Amsterdam Acquisition Sub, Inc. ("Amsterdam" ), and
14 certain BigBand officers and directors arising out of the Individual Defendants'as defined
15 herein) seeking equitable relief for the Individual Defendants'reaches of fiduciary duty arising
16 out of their attempt to sell the Company to AtuuS by means of an unfair process and for what
17 appears to be an inadequate price (the, "Proposed Transaction" ) and against BigBand, ARRIS
18 and Amsterdam for aiding and abetting the aforementioned breaches of fiduciary duty. In
19 pursuing the Proposed Transaction each of the defendants has violated applicable law by directly
20 breaching and/or aiding breaches of the fiduciary duties of loyalty and/or due care and/or
21 disclosure owed to Plaintiffs and the proposed class.
22 2. On March 5,2010, ValueAct SmallCap Master Fund ("ValueAct") disclosed that
23 it had acquired 6.3'/0 of BigBand. Defendant David Lockwood ("Lockwood") of ValueAct
24 notified BigBand's Board of Directors that he was interested in being appointed to the
25 Company's Board. On July 28, 2010, after ValueAct had increased its ownership of shares in the
26 Company to approximately 14.8'/o, Defendant Lockwood was appointed to BigBand's Board of
27 Directors. At the same time, ValueAct entered into a standstill agreement that prohibited it from
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AMENDED CLASS ACTION COMPLAINT
1 effecting an acquisition of the Company. Although ValueAct would later seek to annul the
2 standstill agreement and offer to purchase the Company for $ 4.00 per share.
3 3. On October 10, 2011, BigBand entered into an Agreement and Plan of Merger
4 and Reorganization (the, "Merger Agreement" ) with ARRIS, and Amsterdam, for the acquisition
5 of the Company by ARRIS. Pursuant to the terms of the Proposed Transaction and Merger
6 Agreement, ARMS and Amsterdam will acquire all of BigBand's outstanding shares of common
7 stock for approximately $ 172 million. The Proposed Transaction has been approved by
8 BigBand's board of directors (the, "Board"). Under the Proposed Transaction may tender their
9 shares for $ 2.24 per share (the"Offer Price" ).
10 4. The Proposed Transaction in structured in three steps: (a) a first-step tender offer
11 (the Exchange Offer), (b) a top-up option through which ARRIS can acquire a significant
12 number of additional BigBand shares in order to reach one share more than 90% ownership of
13 BigBand common stock (the, "Top-up Option" ), and (c) a short-form merger to cash out any
14 BigBand stockholders who do not tender.
15 5. The officers and directors of BigBand have decided to pursue their own interests,
16 seeking to cash in on valuable change-in-control agreements or prestigious positions in the post-
17 Proposed Merger company instead of maximizing value for all BigBand shareholders.
18 6. On October 21, 2011, the Company filed with the SEC a Schedule 14D-9
19 purportedly to inform its shareholders about the terms of the Proposed Transaction, the Exchange
20 Offer and the negotiations thereof (the, "Schedule 14D-9"). The Schedule 14D-9 was filed the
21 same day that ARRIS filed a registration statement with the SEC to register shares pursuant to
22 the Exchange Offer (the, "Prospectus" ), and the same day ARRIS announced the start of the
23 tender offer period by filing with the SEC a Schedule TO. The tender offer period is anticipated
24 to expire on November 18, 2011.
25 7. In breach of the fiduciary duties of the Company's directors failed to fully inform
26 shareholders of the material terms of the Proposed Transaction, the Schedule 14D-9 omitted
27 material information concerning both the negotiation process leading to the Proposed
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AMENDED CLASS ACTION COMPLAINT
1 Transaction and the valuation of BigBand. Without the material omissions being corrected prior
2 to the close of the tender offer period, BigBand shareholders are being asked to make a material
3 decision concerning their ownership of BigBand without critical information necessary to being
4 fully informed, The material omissions from the Schedule 14D-9 are critical to the general mix
5 of information available to BigBand,
6 8. Furthermore, the Schedule 14D-9 revealed a hopelessly inadequate sales process
7 controlled by Company insiders who secured lucrative Bonus Agreements for themselves if a
8 change in control were to result at the Company. Notably these Bonus Agreements were entered
9 into only after discussions with ARRIS'bout the potential sale of the Company had been
10 initiated. Moreover, the Schedule 14D-9 reveals that Defendants rejected several expressions of
11 interest for the Company, including ValueAct's $ 4.00 per share proposal.
12 9. Having acceded to ARRIS'emands for exclusivity, the Board then locked up the
13 deal to ensure that no other potential bidders would emerge to top ARRIS'ffer with onerous
14 deal protection devices that effectively eliminate any potential auction process, including: (i) a
15 "no solicitation" provision barring the Board and any Company personnel from attempting to
16 procure a price in excess of the amount offered by ARRIS; (ii) allowing ARRIS a fice matching
17 right to top any superior offer made by another potential acquiror (iii) granting an irrevocable
18 "Top-Up Option" allowing ARRIS to purchase additional shares needed to affect a Short-form
19 Merger and (4) BigBand has agreed to pay an improper termination fee of $ 5.5 million payable
20 to ARRIS in certain circumstances, including if BigBand terminates the Merger Agreement
21 because the Board has determined a superior proposal exists.
22 10. In addition, to the preclusive deal protection devices, the Individual Defendants
23 have induced some of the largest stockholders of the Company who hold approximately 32% of
24 the Company's shares to execute agreements in favor of the Proposed Merger virtually ensuring
25 the consummation of the merger., representing approximately 32% of the Company's
26 outstanding common shares, have entered into an Exchange Agreement (the, "Exchange
27 Agreement" ), effective as of October 10, 2011, with in connection with the Proposed
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AMENDED CLASS ACTION COMPLAINT
1 Transaction, agreeing to, among other things, tender their shares of capital stock of the
2 Company, and, if necessary, vote such shares in favor of the Proposed Transaction and against
3 any alternative acquisition proposal. Among the shareholders who entered into voting
4 agreements is ValueAct, whom after being rebuffed by the Company now seeks to liquidate its
5 large block of shares which are relatively illiquid outside of the merger context due to their size.
11. The Exchange Agreement sends a clear message to the 'market', including
7 therefore other potential bidders that the Board favors the Proposed Transaction above any other
8 bids that might exist. The inadequacy of the Board's effort to 'auction'he Company is revealed
9 by the prohibitive deal protection measures enacted by the Board as described above. If the
10 Board truly believed it had reached out to other bidders in a meaningful way, then the deal
11 protection measures, including the exclusive negotiations with ARRIS, are unnecessary. If the
12 Board believes other bidders exist, then they should open the bidding process to allow other
13 bidders to step forward without being penalized by the deal protection devices. In light of the
14 Board's failure to adequately shop the Company and the deal protection devices described above,
15 the addition of the Exchange Agreement is highly unreasonable and prevents any "implicit"post-
16 signing market check.
17 12. Further, the consideration for public shareholders appears inadequate and does not
18 seem to fully take into account the Company's prospects for continued growth. Shares of
19 BigBand traded as high as $ 3.28 on November 5, 2010, and at Wall Street Analysts set low,
20 average, and high stock price targets for the Company's stock at $ 2.50, $ 2.62 and $ 2.75, all
21 well above the Offer Price.
22 13. As illustrated above and alleged in more detail herein, the Board breached their
23 fiduciary duties by, inter alia, failing to maximize shareholder value in connection with the
24 Proposed Transaction and by failing to disclose all material information concerning the Proposed
25 Transaction, Without imminent court intervention, Plaintiffs and the Class will suffer irreparable
26 harm as they must decide whether to tender their shares without all material information
27 necessary to make an informed decision as to the Proposed Transaction. Accordingly, this action
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AMENDED CLASS ACTION COMPLAINT
1 seeks to enjoin the Proposed Transaction and require Defendants to disseminate an accurate and
2 complete information that fully and fairly informs shareholders of all material information
3 concerning the Proposed Transaction in a non-misleading manner.
JURISDICTION AND VENUE
9. This Court has jurisdiction over the causes of action asserted herein pursuant to
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the California Constitution, Article VI, )10, because this case is a cause not given by statute to
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other trial courts.
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10. This Court has jurisdiction over Defendants because they reside and/or conduct
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business in California, including, but not limited to, the conduct here at issue (the Proposed
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Transaction). Defendant is headquartered at 475 Broadway Street, Redwood City, California,
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94085, All Defendants have sufficient minimum contacts with California to render the exercise
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of jurisdiction by the California courts permissible under traditional notions of fair play and
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substantial justice. This action is not removable.
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11. Venue isproper in this Court because the conduct at issue took place and has
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effect in this County. Further, BigBand's headquarters and principal place of business isin the
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County.
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12. This action is not removable because Plaintiffs'laims are expressly exempted
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from the preemption and removal provisions of the Securities Litigation Uniform Standards Act
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of 1988 (SLUSA) under 15 U.S.C. $ 77(p)(d)(1) because they are based upon the statutory and
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common law of the State in which BigBand is incorporated.
21
PARTIES
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13. Plaintiff Ezra Naveh is, and has been at all relevant times, a shareholder of
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BigBand.
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14. Plaintiff Roni Salton is, and has been at all relevant times, a shareholder of
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BigBand.
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15. Defendant BigBand is a corporation organized and existing under the laws of the
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State of Delaware. It maintains its principal corporate offices at 475 Broadway Street, Redwood
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AMENDED CLASS ACTION COMPLAINT
1 City, California, 94085, and develops, markets and sells network-based platforms that enable
2 cable multiple system operators and telecommunication companies to offer video services over
3 coaxial, fiber and copper networks. BigBand common stock trades on the NASDAQ Global
4 Select Market under the symbol "BBND."
5 16, Defendant Amir Bassan-Eskenazi ("Eskenazi") is BigBand's Chief Executive
6 Officer and co-founder. Defendant Eskenazi is and has been a member of the Company's Board
7 of Directors at all relevant times.
8 17. Defendant Harald Braun ("Braun") is Executive Vice President of Worldwide
9 Sales at the Company. Defendant Braun is and has been a member of the Company's Board of
10 Directors at all relevant times.
11 18. Defendant Ken Goldman ("Goldman") is and has been a member of the
12 Company's Board of Directors at all relevanttimes.
13 19. Defendant David Lockwood ("Lockwood") is and has been a member of the
14 Company's Board of Directors at all relevant times.
15 20. Defendant Michael Pohl ("Pohl") is and has been a member of the Company's
16 Board of Directors at all relevant times.
17 21. Defendant Erez Rosen ("Rosen") is and has been a member of the Company's
18 Board of Directors at all relevant times.
19 22. Defendant Robert Sachs ("Sachs" ) isand has been a member of the Company's
20 Board of Directors at all relevant times.
21 23. Defendant Richard C. Smith ("Smith" ) is and has been a member of the
22 Company's Board of Directors at all relevant times.
23 24. Defendant Geoff Yang ("Yang") is and has been a member of the Company's
24 Board of Directors at all relevant times.
25 25. The defendants named above in /$ 16-24 are sometimes collectively referred to
26 herein as the "BigBand Board of Directors." The defendants named above in ][$16-24 are
27 sometimes collectively referred to herein as the "Individual Defendants" or the "Board".
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AMENDED CLASS ACTION COMPLAINT
1 26. Defendant ARRIS is a Delaware corporation that specializes in the design
2 engineering and supply of technology supporting triple and quad-play broadband services for
3 residential and business customers around the world.
4 27. Defendant Amsterdam isa Delaware corporation and a wholly-owned subsidiary
5 of ARRIS. Upon completion of the merger, Amsterdam willmerge with and into BigBand.
INDIVIDUALDKFKNDANTS'IDUCIARYDUTIES
7 28. Under Delaware law, the directors and officers of a publicly traded corporation
8 have fiduciary duties of loyalty, good faith, care, and candor to shareholders. To diligently
9 comply with these duties, neither the directors nor the officers may take any action that:
10 (a) adversely affects the value provided to the corporation's shareholders;
(b) will discourage, inhibit, or deter alternative offers to purchase control of
12 the corporation or its assets;
13 (c) contractually prohibits themselves from complying with their fiduciary
14 duties;
15 (d) will otherwise adversely affect their duty to secure the best value
16 reasonably available under the circumstances for the corporation's shareholders;
17 (e) will provide the directors and/or officers with preferential treatment at the
18 expense of, or separate f'rom, the public shareholders; and/or
19 (f) will fail to disclose all material information concerning the Proposed
20 Merger.
21 29. In accordance with their duties of loyalty and good faith, the Individual
22 Defendants, as directors and/or officers of BigBand, are obligated under Delaware law to refrain
23 from:
24 (a) participating in any transaction where the directors'r officers'oyalties
25 are divided;
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AMENDED CLASS ACTION COMPLAINT
(b) participating in any transaction where the directors or officers receive, or
2 are entitled to receive, a personal financial benefit not equally shared by the public shareholders
3 of the corporation; and/or
(c) unjustly enriching themselves at the expense or to the detriment of the
5 public shareholders.
6 30. Defendants, separately and together, in connection with the Proposed Merger, are
7 knowingly or recklessly violating their fiduciary duties and aiding and abetting such breaches,
8 including their duties of loyalty, good faith, and independence owed to Plaintiffs and other public
9 shareholders of BigBand. Certain of the defendants stand on both sides of the transaction, are
10 engaging in self-dealing, are obtaining for themselves personal benefits, including personal
11 financial benefits not shared equally by Plaintiffs or the Class. In addition, BigBand executives
12 have secured change-in-control termination payments for themselves. Accordingly, the
13 Proposed Merger will benefit the Individual Defendants in significant ways not shared with
14 Class members. As a result of the Individual Defendants'elf-dealing and divided loyalties,
15 neither Plaintiffs nor the Class will receive adequate or fair value for their BigBand common
16 stock in the Proposed Merger.
17 31. Because the Individual Defendants are knowingly or recklessly breaching their
18 duties of loyalty, good faith, and independence in connection with the Proposed Merger, the
19 burden of proving the inherent or entire fairness of the Proposed Merger, including all aspects of
20 its negotiation, structure, price, and terms, is placed upon defendants as a matter of law.
21 CONSPIRACY, AIDINGAND ABETTING AND CONCERTED ACTION
22 32. In committing the wrongful acts alleged herein, each of the Defendants has
23 pursued, or joined in the pursuit of, a common course of conduct, and acted in concert with and
24 conspired with one another, in furtherance of their common plan or design. In addition to the
25 wrongful conduct herein alleged as giving rise to primary liability, theDefendants further aided
26 and abetted and/or assisted each other in breach of their respective duties as herein alleged.
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AMENDED CLASS ACTION COMPLAINT
1 33. During all relevant times hereto, the Defendants, and each of them, initiated a
2 course of conduct which was designed to and did: (i) permit BigBand to attempt to eliminate the
3 public shareholders'quity interest in BigBand pursuant to a defective sales process, and (ii)
4 permit ARRIS to buy the Company for an unfair price. In furtherance of this plan, conspiracy
5 and course of conduct, Defendants, and each of them, took the actions as set forth herein.
6 34. Each of the Defendants herein aided and abetted and rendered substantial
7 assistance in the wrongs complained of herein. In taking such actions, as particularized herein,
8 to substantially assist the commission of the wrongdoing complained of, each Defendant acted
9 with knowledge of the primary wrongdoing, substantially assisted the accomplishment of that
10 wrongdoing, and was aware of his or her overall contribution to, and furtherance of, the
11 wrongdoing. The Defendants'cts of aiding and abetting included, inter alia, the acts each of
12 them are alleged to have committed in furtherance of the conspiracy, common enterprise and
13 common course of conduct complained of herein.
14 CI ASS ACTION ALLEGATIONS
15 35. Plaintiffs bring this action for himself and on behalf of all holders of BigBand
16 common stock which have been or will be harmed by the conduct described herein (the "Class" ).
17 Excluded from the Class are the defendants and any individual or entity affiliated with any
18 defendant.
19 36. This action is properly maintainable as a class action.
20 37. The Class is so numerous that joinder of all members is impracticable. According
21 to BigBand's SEC filings, there were more than 70 million shares of BigBand common stock
22 outstanding as of August 1, 2011.
23 38. There are questions of law and fact which are common to the Class and which
24 predominate over questions affecting any individual Class member. The common questions
25 include, inter alia,the following:
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AMENDED CLASS ACTION COMPLAINT
(a) whether the Individual Defendants have breached their fiduciary duties of
2 undivided loyalty, independence, or due care with respect to Plaintiffs and the other members of
3 the Class in connection with the Proposed Merger;
(b) whether the Individual Defendants are engaging in self-dealing in
5 connection with the Proposed Merger;
(c) whether the Individual Defendants have breached any of their other
7 fiduciary duties owed to Plaintiffs and the other members of the Class in connection with the
8 Proposed Merger, including the duties of good faith, diligence, and fair dealing;
(d) whether BigBand aided and abetted the Individual Defendants'reaches of
10 fiduciary duties;
(e) whether ARRIS and/or Amsterdam aided and abetted the Individual
12 Defendants'reaches of fiduciary duties; and
13 (f) whether Plaintiffs and the other members of the Class would suffer
14 irreparable injury were the transactions complained of herein consummated.
15 39. Plaintiffs'laims are typical of the claims of the other members of the Class and
16 Plaintiffs do not have any interests adverse to the Class.
17 40. Plaintiffs have retained competent counsel experienced in litigation of this nature
18 and will fairly and adequately represent and protect the interests of the Class.
19 41. The prosecution of separate actions by individual members of the Class would
20 create a risk of inconsistent or varying adjudications with respect to individual members of the
21 Class which would establish incompatible standards of conduct for the party opposing the Class.
22 42. Plaintiffs anticipate that there will be no difficulty in the management of this
23 litigation. A class action is superior to other available methods for the fair and efficient
24 adjudication of this controversy.
25 43. Defendants have acted on grounds generally applicable to the Class with respect
26 to the matters complained of herein, thereby making appropriate the relief sought herein with
27 respect to the Class as a whole.
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AMENDED CLASS ACTION COMPLAINT
SUBSTANTIVE ALLEGATIONS
2 BigBand's Future Growth Prospects
3 44. BigBand provides broadband service providers with innovative digital video
4 networking solutions designed to make it easierto move, manage and monetize video. BigBand
5 serves customers in North America, Asia, and Europe —including eight of the ten largest cable
6 and telco service providers in North America.
7 45. The Company has seen solid recent growth. For the second quarter of 2011, the
8 Companies revenues were 19.8 million and its diluted net loss per common share for the three
9 months ended June 30, 2011 decreased to $ 0.12 Rom $ 0.14 &om the previous year.
10 Commenting on the Company's second quarter financial performance, Defendant Eskenazi
ATILT.
11 stated:
12
In the quarter, we made good progress in our growth initiatives, including a major
13
win for our new MSP platform with This win validates the
14
MSP's highly-differentiated advertising capabilities and position in IP Video and
opens new opportunities with telco and cable customers...Broadcast Video, QAM
15 and SDV (Switched Digital Video) continued to contribute solidly to revenue in
the quarter and we are pleased with the progress we have made with our new
16 products.
17 46. For the third quarter of 2011, management has forecasted revenues to grow even
18 further. Further, at least one analyst has set a price target for the Company's shares at $ 2.75.
19 Although the Individual Defendants were well aware of the Company's prospects for further
20 growth they agreed to an Offer Price that substantially undervalues BigBand.
21 47. On October 11, 2010, BigBand and ARRIS jointly issued the following press
22 release announcing that the Individual Defendants had agreed to sellBigBand to ARRIS in a
23 cash-for-stock transaction;
24
Suwanee, GA and Redwood City, CA —October 11, 2011: ARRIS Group,
25 Inc. (Nasdaq:ARRS) and BigBand Networks (Nasdaq:BBND) today announced
that they have entered into a definitive agreement whereby ARRIS will acquire
26 BigBand Networks for a purchase price of $ 2.24 per share in cash. This equates to
a diluted equity value of approximately $ 172 million, or $ 53 million net of
27 estimated BigBand cash on hand.
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AMENDED CLASS ACTION COMPLAINT
With the addition of BigBand's experienced employees, this acquisition further
extends ARRIS'apabilities in the processing, management and distribution of
digital video content and represents an important acquisition of innovative
technologies and significant RkD investments that are expected to accelerate
time-to-market and increase opportunities for ARRIS in several fast growing
product areas. These include the Converged Cable Access Platform (CCAP)
architecture defined by CableLabs, Local and Targeted Advertising, IP Video
Distribution, and Advanced Video Processing and Compression. BigBand's
valuable patent portfolio, coupled with their expertise in digital video networking
will enhance ARRIS'echnological leadership as service providers move to an all
IP Converged Network Architecture.
Upon closing, ARRIS anticipates rapidly optimizing BigBand's financial
performance through meaningful operating synergies such as the elimination of
public company costs and the alignment of sales, marketing, and RAD initiatives.
ARRIS also anticipates that the transaction will be neutral to accretive on a non-
10 GAAP basis for ARRIS shareholders by mid-2012 and will offer upside potential
thereafter by addressing upcoming video network evolution opportunities with a
more complete offering.
12 "We are both enthusiastic and optimistic about the BigBand acquisition because it
13
builds on our stated business strategy of growing our current businesses into a
more complete portfolio including a strong video product suite and investing in
14 the evolution towards network convergence onto an all IP platform," said Bob
Stanzione, ARRIS Chairman & CEO. "In addition, the acquisition offers new
15 opportunities to expand our customer base worldwide. We are delighted to
welcome the BigBand employees to ARRIS."
16
"The BigBand team is proud of its accomplishments over the last 12 years in
17
developing innovative products that enable the transmission of digital television
18 to consumers around the world," said Amir Bassan-Eskenazi, BigBand President
and CEO. "We are excited to see this legacy live on and generate broader
19 opportunities with continued innovation in media processing as part of the world-
class product and service offerings provided by the ARRIS organization."
20
21 The acquisition will be conducted by means of a tender offer for all of the
outstanding shares of BigBand, which is expected to commence within ten
22 business days and will be subject to customary closing conditions, including the
acquisition by ARRIS of a majority of BigBand's shares and the receipt of
23 antitrust clearance in the United States ifapplicable.
24
The board of directors of BigBand has unanimously recommended that the
25 shareholders of BigBand accept the offer. Redpoint Ventures and ValueAct
Capital Partners, holders of 32% of the outstanding shares of BigBand, have
26 agreed to tender their shares in the offer and to vote their shares in favor of the
merger agreement and against any other transaction, subject to the provisions of
27 the agreement. Completion
Preview
1 Lionel Z. Glancy Michael Goldberg Louis N. Boyarsky (¹134180) (¹188669) (¹263379) SAR PILED MN'Ec COUNTY GLANCY BINKOW & GOLDBERG LLP 3 1801 Avenue of the Stars, Suite 311 6ci'4 300 Los Angeles, CA 90067 Telephone: (310) 201-9150 Facsimile: (310) 201-9160 age Email: info@glancylaw.corn 6 Attorneys for P/ainttffs 7 SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN MATEO 10 EZRA NAVEH and RONI SALTON, On Case No.: CIV509114 11 Behalf of Themselves and All Others Similarly Situated 12 AMENDED CLASS ACTION Plaintiffs, COMPLAINTFOR BREACH OF 13 FIDUCIARYDUTY 14 vs. 15 AMIRBAS SAN-ESKENAZI, HARALD JURY TRIALDEMANDED BRAUN, KEN GOLDMAN, DAVID 16 LOCKWOOD, MICHAELPOHL, EREZ ROSEN, ROBERT SACHS, ROBERT C. 17 SMITH, GEOFF YANG, BIGBAND 18 NETWORKS, INC., ARRIS GROUP, INC, and AMSTERDAMACQUISITION SUB, INC. 20 21 22 23 24 25 26 27 AMENDED CLASS ACTION COMPLAINT 1 SUMMARYOF THE ACTION 2 Plaintiffs, by and through their attorneys, alleges upon information and belief, except for 3 his own acts, which are alleged on knowledge, the following against Defendants based upon, 4 among other things, a continuing investigation conducted by and through undersigned counsel 5 into the facts and circumstances alleged herein, including, without limitation, review and 6 analyses of: (i) thepublic filings of BigBand Networks, Inc, and ARRIS Group, Inc., with the 7 United States Securities and Exchange Commission ("SEC"); (ii) press releases, public 8 statements, news articles and other publications disseminated by or concerning BigBand 9 Networks, Inc. and related entities and the Proposed Transaction (defined below); and (iii) 10 Defendants'orporate websites. 11 1. This is a stockholder class action brought by Plaintiffs on behalf of holders of 12 common stock of BigBand Networks, Inc. ("BigBand" or the "Company" ) against BigBand, 13 ARRIS Group, Inc, ("ARRIS"), and Amsterdam Acquisition Sub, Inc. ("Amsterdam" ), and 14 certain BigBand officers and directors arising out of the Individual Defendants'as defined 15 herein) seeking equitable relief for the Individual Defendants'reaches of fiduciary duty arising 16 out of their attempt to sell the Company to AtuuS by means of an unfair process and for what 17 appears to be an inadequate price (the, "Proposed Transaction" ) and against BigBand, ARRIS 18 and Amsterdam for aiding and abetting the aforementioned breaches of fiduciary duty. In 19 pursuing the Proposed Transaction each of the defendants has violated applicable law by directly 20 breaching and/or aiding breaches of the fiduciary duties of loyalty and/or due care and/or 21 disclosure owed to Plaintiffs and the proposed class. 22 2. On March 5,2010, ValueAct SmallCap Master Fund ("ValueAct") disclosed that 23 it had acquired 6.3'/0 of BigBand. Defendant David Lockwood ("Lockwood") of ValueAct 24 notified BigBand's Board of Directors that he was interested in being appointed to the 25 Company's Board. On July 28, 2010, after ValueAct had increased its ownership of shares in the 26 Company to approximately 14.8'/o, Defendant Lockwood was appointed to BigBand's Board of 27 Directors. At the same time, ValueAct entered into a standstill agreement that prohibited it from 28 -1- AMENDED CLASS ACTION COMPLAINT 1 effecting an acquisition of the Company. Although ValueAct would later seek to annul the 2 standstill agreement and offer to purchase the Company for $ 4.00 per share. 3 3. On October 10, 2011, BigBand entered into an Agreement and Plan of Merger 4 and Reorganization (the, "Merger Agreement" ) with ARRIS, and Amsterdam, for the acquisition 5 of the Company by ARRIS. Pursuant to the terms of the Proposed Transaction and Merger 6 Agreement, ARMS and Amsterdam will acquire all of BigBand's outstanding shares of common 7 stock for approximately $ 172 million. The Proposed Transaction has been approved by 8 BigBand's board of directors (the, "Board"). Under the Proposed Transaction may tender their 9 shares for $ 2.24 per share (the"Offer Price" ). 10 4. The Proposed Transaction in structured in three steps: (a) a first-step tender offer 11 (the Exchange Offer), (b) a top-up option through which ARRIS can acquire a significant 12 number of additional BigBand shares in order to reach one share more than 90% ownership of 13 BigBand common stock (the, "Top-up Option" ), and (c) a short-form merger to cash out any 14 BigBand stockholders who do not tender. 15 5. The officers and directors of BigBand have decided to pursue their own interests, 16 seeking to cash in on valuable change-in-control agreements or prestigious positions in the post- 17 Proposed Merger company instead of maximizing value for all BigBand shareholders. 18 6. On October 21, 2011, the Company filed with the SEC a Schedule 14D-9 19 purportedly to inform its shareholders about the terms of the Proposed Transaction, the Exchange 20 Offer and the negotiations thereof (the, "Schedule 14D-9"). The Schedule 14D-9 was filed the 21 same day that ARRIS filed a registration statement with the SEC to register shares pursuant to 22 the Exchange Offer (the, "Prospectus" ), and the same day ARRIS announced the start of the 23 tender offer period by filing with the SEC a Schedule TO. The tender offer period is anticipated 24 to expire on November 18, 2011. 25 7. In breach of the fiduciary duties of the Company's directors failed to fully inform 26 shareholders of the material terms of the Proposed Transaction, the Schedule 14D-9 omitted 27 material information concerning both the negotiation process leading to the Proposed -2- AMENDED CLASS ACTION COMPLAINT 1 Transaction and the valuation of BigBand. Without the material omissions being corrected prior 2 to the close of the tender offer period, BigBand shareholders are being asked to make a material 3 decision concerning their ownership of BigBand without critical information necessary to being 4 fully informed, The material omissions from the Schedule 14D-9 are critical to the general mix 5 of information available to BigBand, 6 8. Furthermore, the Schedule 14D-9 revealed a hopelessly inadequate sales process 7 controlled by Company insiders who secured lucrative Bonus Agreements for themselves if a 8 change in control were to result at the Company. Notably these Bonus Agreements were entered 9 into only after discussions with ARRIS'bout the potential sale of the Company had been 10 initiated. Moreover, the Schedule 14D-9 reveals that Defendants rejected several expressions of 11 interest for the Company, including ValueAct's $ 4.00 per share proposal. 12 9. Having acceded to ARRIS'emands for exclusivity, the Board then locked up the 13 deal to ensure that no other potential bidders would emerge to top ARRIS'ffer with onerous 14 deal protection devices that effectively eliminate any potential auction process, including: (i) a 15 "no solicitation" provision barring the Board and any Company personnel from attempting to 16 procure a price in excess of the amount offered by ARRIS; (ii) allowing ARRIS a fice matching 17 right to top any superior offer made by another potential acquiror (iii) granting an irrevocable 18 "Top-Up Option" allowing ARRIS to purchase additional shares needed to affect a Short-form 19 Merger and (4) BigBand has agreed to pay an improper termination fee of $ 5.5 million payable 20 to ARRIS in certain circumstances, including if BigBand terminates the Merger Agreement 21 because the Board has determined a superior proposal exists. 22 10. In addition, to the preclusive deal protection devices, the Individual Defendants 23 have induced some of the largest stockholders of the Company who hold approximately 32% of 24 the Company's shares to execute agreements in favor of the Proposed Merger virtually ensuring 25 the consummation of the merger., representing approximately 32% of the Company's 26 outstanding common shares, have entered into an Exchange Agreement (the, "Exchange 27 Agreement" ), effective as of October 10, 2011, with in connection with the Proposed -3- AMENDED CLASS ACTION COMPLAINT 1 Transaction, agreeing to, among other things, tender their shares of capital stock of the 2 Company, and, if necessary, vote such shares in favor of the Proposed Transaction and against 3 any alternative acquisition proposal. Among the shareholders who entered into voting 4 agreements is ValueAct, whom after being rebuffed by the Company now seeks to liquidate its 5 large block of shares which are relatively illiquid outside of the merger context due to their size. 11. The Exchange Agreement sends a clear message to the 'market', including 7 therefore other potential bidders that the Board favors the Proposed Transaction above any other 8 bids that might exist. The inadequacy of the Board's effort to 'auction'he Company is revealed 9 by the prohibitive deal protection measures enacted by the Board as described above. If the 10 Board truly believed it had reached out to other bidders in a meaningful way, then the deal 11 protection measures, including the exclusive negotiations with ARRIS, are unnecessary. If the 12 Board believes other bidders exist, then they should open the bidding process to allow other 13 bidders to step forward without being penalized by the deal protection devices. In light of the 14 Board's failure to adequately shop the Company and the deal protection devices described above, 15 the addition of the Exchange Agreement is highly unreasonable and prevents any "implicit"post- 16 signing market check. 17 12. Further, the consideration for public shareholders appears inadequate and does not 18 seem to fully take into account the Company's prospects for continued growth. Shares of 19 BigBand traded as high as $ 3.28 on November 5, 2010, and at Wall Street Analysts set low, 20 average, and high stock price targets for the Company's stock at $ 2.50, $ 2.62 and $ 2.75, all 21 well above the Offer Price. 22 13. As illustrated above and alleged in more detail herein, the Board breached their 23 fiduciary duties by, inter alia, failing to maximize shareholder value in connection with the 24 Proposed Transaction and by failing to disclose all material information concerning the Proposed 25 Transaction, Without imminent court intervention, Plaintiffs and the Class will suffer irreparable 26 harm as they must decide whether to tender their shares without all material information 27 necessary to make an informed decision as to the Proposed Transaction. Accordingly, this action -4- AMENDED CLASS ACTION COMPLAINT 1 seeks to enjoin the Proposed Transaction and require Defendants to disseminate an accurate and 2 complete information that fully and fairly informs shareholders of all material information 3 concerning the Proposed Transaction in a non-misleading manner. JURISDICTION AND VENUE 9. This Court has jurisdiction over the causes of action asserted herein pursuant to 6 the California Constitution, Article VI, )10, because this case is a cause not given by statute to 7 other trial courts. 8 10. This Court has jurisdiction over Defendants because they reside and/or conduct 9 business in California, including, but not limited to, the conduct here at issue (the Proposed 10 Transaction). Defendant is headquartered at 475 Broadway Street, Redwood City, California, 11 94085, All Defendants have sufficient minimum contacts with California to render the exercise 12 of jurisdiction by the California courts permissible under traditional notions of fair play and 13 substantial justice. This action is not removable. 14 11. Venue isproper in this Court because the conduct at issue took place and has 15 effect in this County. Further, BigBand's headquarters and principal place of business isin the 16 County. 17 12. This action is not removable because Plaintiffs'laims are expressly exempted 18 from the preemption and removal provisions of the Securities Litigation Uniform Standards Act 19 of 1988 (SLUSA) under 15 U.S.C. $ 77(p)(d)(1) because they are based upon the statutory and 20 common law of the State in which BigBand is incorporated. 21 PARTIES 22 13. Plaintiff Ezra Naveh is, and has been at all relevant times, a shareholder of 23 BigBand. 24 14. Plaintiff Roni Salton is, and has been at all relevant times, a shareholder of 25 BigBand. 26 15. Defendant BigBand is a corporation organized and existing under the laws of the 27 State of Delaware. It maintains its principal corporate offices at 475 Broadway Street, Redwood 28 -5- AMENDED CLASS ACTION COMPLAINT 1 City, California, 94085, and develops, markets and sells network-based platforms that enable 2 cable multiple system operators and telecommunication companies to offer video services over 3 coaxial, fiber and copper networks. BigBand common stock trades on the NASDAQ Global 4 Select Market under the symbol "BBND." 5 16, Defendant Amir Bassan-Eskenazi ("Eskenazi") is BigBand's Chief Executive 6 Officer and co-founder. Defendant Eskenazi is and has been a member of the Company's Board 7 of Directors at all relevant times. 8 17. Defendant Harald Braun ("Braun") is Executive Vice President of Worldwide 9 Sales at the Company. Defendant Braun is and has been a member of the Company's Board of 10 Directors at all relevant times. 11 18. Defendant Ken Goldman ("Goldman") is and has been a member of the 12 Company's Board of Directors at all relevanttimes. 13 19. Defendant David Lockwood ("Lockwood") is and has been a member of the 14 Company's Board of Directors at all relevant times. 15 20. Defendant Michael Pohl ("Pohl") is and has been a member of the Company's 16 Board of Directors at all relevant times. 17 21. Defendant Erez Rosen ("Rosen") is and has been a member of the Company's 18 Board of Directors at all relevant times. 19 22. Defendant Robert Sachs ("Sachs" ) isand has been a member of the Company's 20 Board of Directors at all relevant times. 21 23. Defendant Richard C. Smith ("Smith" ) is and has been a member of the 22 Company's Board of Directors at all relevant times. 23 24. Defendant Geoff Yang ("Yang") is and has been a member of the Company's 24 Board of Directors at all relevant times. 25 25. The defendants named above in /$ 16-24 are sometimes collectively referred to 26 herein as the "BigBand Board of Directors." The defendants named above in ][$16-24 are 27 sometimes collectively referred to herein as the "Individual Defendants" or the "Board". -6- AMENDED CLASS ACTION COMPLAINT 1 26. Defendant ARRIS is a Delaware corporation that specializes in the design 2 engineering and supply of technology supporting triple and quad-play broadband services for 3 residential and business customers around the world. 4 27. Defendant Amsterdam isa Delaware corporation and a wholly-owned subsidiary 5 of ARRIS. Upon completion of the merger, Amsterdam willmerge with and into BigBand. INDIVIDUALDKFKNDANTS'IDUCIARYDUTIES 7 28. Under Delaware law, the directors and officers of a publicly traded corporation 8 have fiduciary duties of loyalty, good faith, care, and candor to shareholders. To diligently 9 comply with these duties, neither the directors nor the officers may take any action that: 10 (a) adversely affects the value provided to the corporation's shareholders; (b) will discourage, inhibit, or deter alternative offers to purchase control of 12 the corporation or its assets; 13 (c) contractually prohibits themselves from complying with their fiduciary 14 duties; 15 (d) will otherwise adversely affect their duty to secure the best value 16 reasonably available under the circumstances for the corporation's shareholders; 17 (e) will provide the directors and/or officers with preferential treatment at the 18 expense of, or separate f'rom, the public shareholders; and/or 19 (f) will fail to disclose all material information concerning the Proposed 20 Merger. 21 29. In accordance with their duties of loyalty and good faith, the Individual 22 Defendants, as directors and/or officers of BigBand, are obligated under Delaware law to refrain 23 from: 24 (a) participating in any transaction where the directors'r officers'oyalties 25 are divided; 26 27 -7- AMENDED CLASS ACTION COMPLAINT (b) participating in any transaction where the directors or officers receive, or 2 are entitled to receive, a personal financial benefit not equally shared by the public shareholders 3 of the corporation; and/or (c) unjustly enriching themselves at the expense or to the detriment of the 5 public shareholders. 6 30. Defendants, separately and together, in connection with the Proposed Merger, are 7 knowingly or recklessly violating their fiduciary duties and aiding and abetting such breaches, 8 including their duties of loyalty, good faith, and independence owed to Plaintiffs and other public 9 shareholders of BigBand. Certain of the defendants stand on both sides of the transaction, are 10 engaging in self-dealing, are obtaining for themselves personal benefits, including personal 11 financial benefits not shared equally by Plaintiffs or the Class. In addition, BigBand executives 12 have secured change-in-control termination payments for themselves. Accordingly, the 13 Proposed Merger will benefit the Individual Defendants in significant ways not shared with 14 Class members. As a result of the Individual Defendants'elf-dealing and divided loyalties, 15 neither Plaintiffs nor the Class will receive adequate or fair value for their BigBand common 16 stock in the Proposed Merger. 17 31. Because the Individual Defendants are knowingly or recklessly breaching their 18 duties of loyalty, good faith, and independence in connection with the Proposed Merger, the 19 burden of proving the inherent or entire fairness of the Proposed Merger, including all aspects of 20 its negotiation, structure, price, and terms, is placed upon defendants as a matter of law. 21 CONSPIRACY, AIDINGAND ABETTING AND CONCERTED ACTION 22 32. In committing the wrongful acts alleged herein, each of the Defendants has 23 pursued, or joined in the pursuit of, a common course of conduct, and acted in concert with and 24 conspired with one another, in furtherance of their common plan or design. In addition to the 25 wrongful conduct herein alleged as giving rise to primary liability, theDefendants further aided 26 and abetted and/or assisted each other in breach of their respective duties as herein alleged. 27 -8- AMENDED CLASS ACTION COMPLAINT 1 33. During all relevant times hereto, the Defendants, and each of them, initiated a 2 course of conduct which was designed to and did: (i) permit BigBand to attempt to eliminate the 3 public shareholders'quity interest in BigBand pursuant to a defective sales process, and (ii) 4 permit ARRIS to buy the Company for an unfair price. In furtherance of this plan, conspiracy 5 and course of conduct, Defendants, and each of them, took the actions as set forth herein. 6 34. Each of the Defendants herein aided and abetted and rendered substantial 7 assistance in the wrongs complained of herein. In taking such actions, as particularized herein, 8 to substantially assist the commission of the wrongdoing complained of, each Defendant acted 9 with knowledge of the primary wrongdoing, substantially assisted the accomplishment of that 10 wrongdoing, and was aware of his or her overall contribution to, and furtherance of, the 11 wrongdoing. The Defendants'cts of aiding and abetting included, inter alia, the acts each of 12 them are alleged to have committed in furtherance of the conspiracy, common enterprise and 13 common course of conduct complained of herein. 14 CI ASS ACTION ALLEGATIONS 15 35. Plaintiffs bring this action for himself and on behalf of all holders of BigBand 16 common stock which have been or will be harmed by the conduct described herein (the "Class" ). 17 Excluded from the Class are the defendants and any individual or entity affiliated with any 18 defendant. 19 36. This action is properly maintainable as a class action. 20 37. The Class is so numerous that joinder of all members is impracticable. According 21 to BigBand's SEC filings, there were more than 70 million shares of BigBand common stock 22 outstanding as of August 1, 2011. 23 38. There are questions of law and fact which are common to the Class and which 24 predominate over questions affecting any individual Class member. The common questions 25 include, inter alia,the following: 26 27 -9- AMENDED CLASS ACTION COMPLAINT (a) whether the Individual Defendants have breached their fiduciary duties of 2 undivided loyalty, independence, or due care with respect to Plaintiffs and the other members of 3 the Class in connection with the Proposed Merger; (b) whether the Individual Defendants are engaging in self-dealing in 5 connection with the Proposed Merger; (c) whether the Individual Defendants have breached any of their other 7 fiduciary duties owed to Plaintiffs and the other members of the Class in connection with the 8 Proposed Merger, including the duties of good faith, diligence, and fair dealing; (d) whether BigBand aided and abetted the Individual Defendants'reaches of 10 fiduciary duties; (e) whether ARRIS and/or Amsterdam aided and abetted the Individual 12 Defendants'reaches of fiduciary duties; and 13 (f) whether Plaintiffs and the other members of the Class would suffer 14 irreparable injury were the transactions complained of herein consummated. 15 39. Plaintiffs'laims are typical of the claims of the other members of the Class and 16 Plaintiffs do not have any interests adverse to the Class. 17 40. Plaintiffs have retained competent counsel experienced in litigation of this nature 18 and will fairly and adequately represent and protect the interests of the Class. 19 41. The prosecution of separate actions by individual members of the Class would 20 create a risk of inconsistent or varying adjudications with respect to individual members of the 21 Class which would establish incompatible standards of conduct for the party opposing the Class. 22 42. Plaintiffs anticipate that there will be no difficulty in the management of this 23 litigation. A class action is superior to other available methods for the fair and efficient 24 adjudication of this controversy. 25 43. Defendants have acted on grounds generally applicable to the Class with respect 26 to the matters complained of herein, thereby making appropriate the relief sought herein with 27 respect to the Class as a whole. — 10- AMENDED CLASS ACTION COMPLAINT SUBSTANTIVE ALLEGATIONS 2 BigBand's Future Growth Prospects 3 44. BigBand provides broadband service providers with innovative digital video 4 networking solutions designed to make it easierto move, manage and monetize video. BigBand 5 serves customers in North America, Asia, and Europe —including eight of the ten largest cable 6 and telco service providers in North America. 7 45. The Company has seen solid recent growth. For the second quarter of 2011, the 8 Companies revenues were 19.8 million and its diluted net loss per common share for the three 9 months ended June 30, 2011 decreased to $ 0.12 Rom $ 0.14 &om the previous year. 10 Commenting on the Company's second quarter financial performance, Defendant Eskenazi ATILT. 11 stated: 12 In the quarter, we made good progress in our growth initiatives, including a major 13 win for our new MSP platform with This win validates the 14 MSP's highly-differentiated advertising capabilities and position in IP Video and opens new opportunities with telco and cable customers...Broadcast Video, QAM 15 and SDV (Switched Digital Video) continued to contribute solidly to revenue in the quarter and we are pleased with the progress we have made with our new 16 products. 17 46. For the third quarter of 2011, management has forecasted revenues to grow even 18 further. Further, at least one analyst has set a price target for the Company's shares at $ 2.75. 19 Although the Individual Defendants were well aware of the Company's prospects for further 20 growth they agreed to an Offer Price that substantially undervalues BigBand. 21 47. On October 11, 2010, BigBand and ARRIS jointly issued the following press 22 release announcing that the Individual Defendants had agreed to sellBigBand to ARRIS in a 23 cash-for-stock transaction; 24 Suwanee, GA and Redwood City, CA —October 11, 2011: ARRIS Group, 25 Inc. (Nasdaq:ARRS) and BigBand Networks (Nasdaq:BBND) today announced that they have entered into a definitive agreement whereby ARRIS will acquire 26 BigBand Networks for a purchase price of $ 2.24 per share in cash. This equates to a diluted equity value of approximately $ 172 million, or $ 53 million net of 27 estimated BigBand cash on hand. 28 -11- AMENDED CLASS ACTION COMPLAINT With the addition of BigBand's experienced employees, this acquisition further extends ARRIS'apabilities in the processing, management and distribution of digital video content and represents an important acquisition of innovative technologies and significant RkD investments that are expected to accelerate time-to-market and increase opportunities for ARRIS in several fast growing product areas. These include the Converged Cable Access Platform (CCAP) architecture defined by CableLabs, Local and Targeted Advertising, IP Video Distribution, and Advanced Video Processing and Compression. BigBand's valuable patent portfolio, coupled with their expertise in digital video networking will enhance ARRIS'echnological leadership as service providers move to an all IP Converged Network Architecture. Upon closing, ARRIS anticipates rapidly optimizing BigBand's financial performance through meaningful operating synergies such as the elimination of public company costs and the alignment of sales, marketing, and RAD initiatives. ARRIS also anticipates that the transaction will be neutral to accretive on a non- 10 GAAP basis for ARRIS shareholders by mid-2012 and will offer upside potential thereafter by addressing upcoming video network evolution opportunities with a more complete offering. 12 "We are both enthusiastic and optimistic about the BigBand acquisition because it 13 builds on our stated business strategy of growing our current businesses into a more complete portfolio including a strong video product suite and investing in 14 the evolution towards network convergence onto an all IP platform," said Bob Stanzione, ARRIS Chairman & CEO. "In addition, the acquisition offers new 15 opportunities to expand our customer base worldwide. We are delighted to welcome the BigBand employees to ARRIS." 16 "The BigBand team is proud of its accomplishments over the last 12 years in 17 developing innovative products that enable the transmission of digital television 18 to consumers around the world," said Amir Bassan-Eskenazi, BigBand President and CEO. "We are excited to see this legacy live on and generate broader 19 opportunities with continued innovation in media processing as part of the world- class product and service offerings provided by the ARRIS organization." 20 21 The acquisition will be conducted by means of a tender offer for all of the outstanding shares of BigBand, which is expected to commence within ten 22 business days and will be subject to customary closing conditions, including the acquisition by ARRIS of a majority of BigBand's shares and the receipt of 23 antitrust clearance in the United States ifapplicable. 24 The board of directors of BigBand has unanimously recommended that the 25 shareholders of BigBand accept the offer. Redpoint Ventures and ValueAct Capital Partners, holders of 32% of the outstanding shares of BigBand, have 26 agreed to tender their shares in the offer and to vote their shares in favor of the merger agreement and against any other transaction, subject to the provisions of 27 the agreement. Completion