The Facebook, Inc. v. Connectu, Inc et al

Filing 481

Transcript of Proceedings held on 07/02/08, before Judge Ware. Court Reporter/Transcriber Irene L. Rodriguez, Telephone number [phone]. Per General Order No. 59 and Judicial Conference policy, this transcript may be viewed only at the Clerks Office public terminal or may be purchased through the Court Reporter/Transcriber until the deadline for the Release of Transcript Restriction.After that date it may be obtained through PACER. Any Notice of Intent to Request Redaction, if required, is due no later than 5 business days from date of this filing. Redaction Request due 7/28/2008. Redacted Transcript Deadline set for 8/6/2008. Release of Transcript Restriction set for 10/6/2008. (Rodriguez, Irene) (Filed on 7/9/2008)

T h e Facebook, Inc. v. Connectu, LLC et al

D o c . 48

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I N THE UNITED STATES DISTRICT COURT FOR T H E N O R T H E R N D I S T R I C T O F CALIFORNIA SAN JOSE DIVISION

THE FACEBOOK , I N C. , PLAINTIFF, V. CONNECTU, L L C, ET AL. , DEFENDANTS . ___ ___ ___ ___ ___ ___ ___ __

) ) ) ) ) ) ) ) ) )

C -07 -01389 -JW JULY 2, 2008

P A G E S 1 -73

THE PROCEEDINGS WERE HELD BEFORE THE HONORABLE U N I T E D STATES DISTRICT JUDGE JAMES WARE A P P E A R A N C E S: FOR THE PLAINTIFF : ORRICK , HERRINGTON & SUTCLIFFE BY: I . NEEL CHATTERJEE THERESA A. SUTTON YVONNE GREER 1000 MARSH ROAD MENLO PARK, CALIFORNIA 9 4 0 2 5

F O R T H E DEFENDANTS: BOIES, SCHILLER & FLEXNER BY: D A V I D A . BARRETT EVAN ANDREW PARKE D . MICHAEL UNDERHILL 575 LEXINGTON A V E N U E 7TH FLOOR NEW YORK, N E W YORK 10022 (APPEARANCES CONTINUED O N T H E NEXT PAGE .) OFFICIAL COURT REPORTER : I R E N E RODRIGUEZ, C S R, CRR CERTIFICATE NUMBER 8074 1

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Dockets.Justia.co

1 A P P E A R A N C E S: (CONT' D) 2 3 4 5 6 7 ALSO PRESENT: 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 2 CNET NEWS B Y: GREG SANDOVAL 235 SECOND STREET SAN FRANCISCO , CALIFORNIA 94105 HELLER EHRMAN B Y: ROBERT HAWK MELYSSA E. MINAMOTO 275 MIDDLEFIELD ROAD MENLO PARK , CALIFORNIA 94025 Q U I N N, EMANUEL, URQUHART, OLIVER & HEDGES B Y: BRUCE V A N DALSEM RANDY GARTEISER 8 6 5 S. FIGUEROA STREET 1 0TH FLOOR LOS ANGELES, CALIFORNIA 90017 H O L M E, ROBERTS & OWEN B Y: ROGER MYERS KATHERINE KEATING 560 MISSION STREET 2 5TH FLOOR SAN FRANCISCO , CALIFORNIA 94105 FOR THE DEFENDANTS: FINNEGAN, HENDERSON , FARABOW , GARRETT & DUNNER B Y: SCOTT R. MOSKO STANFORD RESEARCH PARK 3300 HILLVIEW AVENUE PALO ALTO, CALIFORNIA 94304

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SAN JOSE , CALIFORNIA

JULY 2 ND, 20 08

PROCEEDINGS 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 HONOR . T H E COURT: T H E CLERK: CALL THE NEXT MATTER. CALLING CASE NUMBER 07 -13 89, ( WHEREUPON , C O U R T C O N V E N E D A N D THE FOLLOWING PROCEEDINGS WERE HELD: )

T H E F A C E B O O K, INC ., VERSUS CONNECTU , E T A L. CALLING N O NPARTY CN E T' S M O T I O N TO UNSEAL FILINGS AND TRANSCRIPT. FIFTEEN MINUTES EACH SIDE . COUNSEL , COME FORWARD AND STATE YOUR APPEARANCES . M S. SUTTON : GOOD MORNING , YOUR HONOR .

THERESA SUTTON F O R O R R I C K, HERRINGTON & S U T T O N FOR COUNSEL TO THE PLAINTIFFS THE FACEBOOK A N D MARK ZUCKERBERG. M R. MYERS: GOOD MORNING. ROGER MYERS ON

B E H A L F O F H O L M E, ROBERTS & OWEN ON BEHALF OF CN E T. T H E COURT: M R. MYERS, IS THERE ANYTHING

MORE YOU WOULD WISH TO SAY TO T H E C O U R T WITH RESPECT TO THE M O T I O N T O INTERVENE FOR A LIMITED PURPOSE AND T H E M O T I O N TO UNSEAL DOCUMENTS? M R. MYERS: ONLY A COUPLE OF T H I N G S, YOUR

FIRST I WANT TO THANK T H E C O U R T F O R SETTING 3

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THIS ON AN EXPEDITED BASIS SO WE C A N HAVE IT HEARD TODAY WITH THE OTHER M O T I O N. I THINK T H E PARTIES HAVE AGREED IN THEIR BRIEFS O N SEVERAL THINGS: O N E, THAT T H E MOTION TO

INTERVENE S H O U L D BE GRANTED; AND , T W O, THAT THE TRANSCRIPT OF THE HEARING ON JUNE 2 3RD , A N D THE M O T I O N THAT W A S A T I S S U E I N THAT HEARING AND A L L O F T H E P A P E R S RELATED T O THAT M O T I O N S H O U L D BE UNSEALED , ALTHOUGH T H E PARTIES D I SA G R E E O N WHETHER E I T H E R T H E TRANSCRIPT O R A N Y OF THE P A P E R S S H O U L D BE REDACTED . T H E PARTIES ALSO AGREE THAT THE REMAINDER OF T H E RECORDS COULD BE REFERRED TO A MAGISTRATE JUDGE A N D ALTHOUGH W E D I SA G R E E O N T H E PROCEDURES A N D T H E REQUIREMENT THAT W O U L D B E S H O W N T H E R E. O N THE TRANSCRIPT AND BOTH - - AND ACTUALLY T H E M O T I O N AS WELL, I D O N' T T H I N K T H E R E'S ANY REASONABLE DISPUTE THAT THE MOTION WAS A DISPOSITIVE M O T I O N A N D THAT I T, IF GRANTED, AND IT HAS BEEN GRANTED, WILL TERMINATE THE CASE . A S A R E S U L T, ALL OF T H E M O V I N G PAPERS A N D T H E P A P E R S RELATED T O THAT M O T I O N HAVE TO MEET THE COMPELLING NEEDS TEST. THAT REQUIRES THAT THEY D O MORE THAN COME IN A N D S A Y THERE IS CONFIDENTIAL INFORMATION HERE. 4

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T H E CASE THAT THEY PRIMARILY RELY ON, WHICH IS T H E ENCYCLOPEDIA BROWN CASE, SPECIFICALLY TALKS ABOUT THAT ISSUE AND SAYS THAT WITH RESPECT TO CONFIDENTIAL I N F O R M A T I O N, FIRST IT SAYS BASICALLY I T H A S TO BE AKIN T O A TRADE S E C R E T B U T THEN IT HAS TO BE PROOF OF COMPETITIVE HARM, A N D WITH RESPECT T O COMPETITIVE HARM VAGUE AND CONCLUSORY ALLEGATIONS WILL NOT SUFFICE. MOVANT MUST PROVE THAT DISCLOSURE WOULD WORK, A CLEARLY DECLINED A N D VERY SERIOUS INJURY. A N D IN THAT CASE TESTIMONY W A S ACTUALLY PRESENTED T O SHOW THAT THE INFORMATION WOULD WORK IN COMPETITIVE HARM. I N THIS SITUATION A L L WE GOT IN RESPONSE TO O U R M O T I O N WAS AN OPPOSITION BRIEF WITHOUT A N Y DECLARATIONS O R TESTIMONY OR ANY EXPLANATION ABOUT H O W KEEPING A N Y PART OF T H E P A P E R S THAT WERE FILED WITH RESPECT T O T H E MOTION TO ENFORCE THE SETTLEMENT WOULD ACTUALLY WORK A COMPETITIVE HARM. N O, NO PROOF, NO SHOWING, JUST THE ASSERTIONS, THE CONCLUSORY ALLEGATIONS WHICH THE NINTH CIRCUIT, JUDGE PATEL IN T H E M C C O Y CASE , VIRTUALLY E V E R Y C O U R T THAT H A S L O O K E D AT THIS H A S SAID THAT I S NOT ENOUGH . WITH RESPECT TO THE TRANSCRIPT, THAT HAS 5

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TO MEET UNDER PHOENIX NEWSPAPERS T H E N I N T H CIRCUIT SAID WHEN Y O U HAVE A TRANSCRIPT OF A HEARING TO WHICH T H E P U B L I C HAS T H E R I G H T O F A C C E S S, T H E F I R S T AMENDMENT TEST H A S T O B E APPLIED WHEN YOU 'RE TALKING ABOUT RELEASING THE TRANSCRIPT . W E T H I N K, AND I' M H A P P Y T O A N S W E R ANY QUESTIONS O N THIS , W E T H I N K I T'S PRETTY C L E A R THAT T H E F I R S T AMENDMENT RIGHT OF ACCESS ATTACHES TO A M O T I O N T O ENFORCE OR TO APPROVE A SETTLEMENT . I MEAN, JUDGE PATEL SAID SO IN THE MCCOY CASE. Y O U HAVE T H E BANK O F AMERICA CASE OUT OF T H E

THIRD CIRCUIT IN WHICH THE COURT SAID THAT A M O T I O N TO ENFORCE A SETTLEMENT IS P U B L I C. YOU HAVE THE JESSUP CASE FROM JUDGE P O S N E R I N T H E SEVENT H CIRCUIT IN WHICH T H E C O U R T SAID THAT A M O T I O N SEEKING JUDICIAL APPROVAL OF A SETTLEMENT IS PUBLIC . Y O U EVEN HAVE T H E G L E N N F A L L S CASE IN T H E S E C O N D CIRCUIT THAT THE PLAINTIFFS HAVE C I T E D I N WHICH THE SECOND CIRCUIT DISTINGUISHED DISCUSSIONS ABOUT A DRAFT TO SETTLEMENT W H I C H C O U L D B E HELD IN CHAMBERS WITH A M O T I O N TO ENFORCE O R R E J E C T THE SETTLEMENT WHICH THE S E C O N D CIRCUIT H A S SAID H A D T O BE HELD IN OPEN C O U R T. S O W E T H I N K I T'S CLEAR THERE W A S A FIRST 6

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AMENDMENT R I G H T O F A C C E S S ON THE 23 D A N D THAT M E A N S THEY HAVE T O MEET T H E COMPELLING INTEREST TEST AND IF THEY HAVEN' T M E T THE COMPELLING NEEDS TEST, THEY CERTAINLY H A V E N'T M E T T H E COMPELLING I N T E R E S T TEST . I D O N'T KNOW IF YOU WANT TO HEAR A N Y T H I N G WITH RESPECT T O T H E REFERRAL TO THE MAGISTRATE JUDGE . I T H I N K I T'S PRETTY C L E A R THAT THEY HAVE

T H E B U R D E N AND THEY HAVE T O C A R R Y T H E I R B U R D E N AND SO WE 'RE FINE WITH REFERRING IT TO A MAGISTRATE JUDGE TO R E V I E W. W E W O U L D LIKE TO BE QUICK BECAUSE OF THE TIMELINESS FACTOR AND THE NEWSWORTHINESS FACTOR . A N D W E W O U L D ALSO LIKE THE COURT TO BE CLEAR IN I T S REFERRAL ORDER THAT THEY HAVE TO CARRY THEIR BURDEN. T H E R E W A S AN ORDER IN THE S U N V E R S U S MICROSOFT CASE THAT JUDGE WHYTE HAD IN THIS COURTROOM. AND A SIMILAR THING HAPPENED WHERE A

L O T O F DOCUMENTS WERE U N S E A L E D A N D THE MEDIA INTERVENED AND JUDGE WHYTE IN THAT CASE A C T U A L L Y REFERRED IT TO A SPECIAL M A S T E R AND HE APPOINTED F O R M E R J U D G E RENFREW AS A SPECIAL M A S T E R PAID F O R BY S U N A N D MICROSOFT . A N D I T H I N K U S I N G A MAGISTRATE JUDGE IS PROBABLY MORE EFFICIENT F O R T H E PARTIES, AND WE 'RE 7

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FINE WITH THAT , B U T IN THAT CASE THERE W A S A N O R D E R MODIFYING THE STIPULATED PROTECTIVE ORDER REQUIRING THAT THE PARTIES COME I N A N D MAKE A SHOWING TO JUSTIFY THE SEALING, T H E CONTINUED SEALING O F A N Y DOCUMENTS O R T H E REDACTIONS A N D AS A R E S U L T MOST O F THE DOCUMENTS WERE UNSEALED ONLY WITH LIMITED REDACTIONS AND WE WOULD A S K THAT A SIMILAR PROCEDURE B E EMPLOYED I N THIS CASE. T H E COURT: M S. SUTTON : VERY WE L L. M S. SUTTON . IF I

THANK YOU , YOUR HONOR .

COULD WORK BACKWARDS REAL QUICKLY, IN TERMS OF THE REFERRAL TO T H E MAGISTRATE JUDGE , M R. MYERS SUGGESTED THAT IT H A P P E N QUICKLY . WHAT THAT M E A N S. I'M N O T SURE

T H E R E C O R D IS VOLUMINOUS, AND WE

WOULD REQUEST A REASONABLE A M O U N T O F TIME TO GO THROUGH AND ANALYZE THE DOCUMENTS THAT HAVE PREVIOUSLY BEEN UNDER SEAL . THIS CASE HAS BEEN GOING ON THREE AND A HALF YEARS. S O I T'S GOING TO TAKE SOME TIME TO

PARSE THROUGH THE R E C O R D A N D THEN PREPARE A N Y DECLARATIONS THAT THE COURT MIGHT DEEM NECESSARY T O MEET A DIFFERENT BURDEN . T H E RECORDS THAT WERE FILED IN THE SUPER IOR COURT , M R. MYERS DOESN' T DISCUSS WHETHER OR N O T H E W A N T S T O G O BACK TO T H E BEGINNING OF THE 8

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CASE OR JUST T O WHEN T H E CASE W A S REMOVED B U T I N T H E S U P E R I O R C O U R T I N 2 001 T H E J U D I C I A L COUNSEL INSTITUTED NEW PROCEDURES IN WHICH THE PARTIES WERE COMPELLED - - WERE REQUIRED TO MEET A COMPELLING INTEREST STANDARD IN GETTING ANYTHING SEALED . S O T O THE EXTENT THAT DOCUMENTS WERE SEALED I N SUPERIOR C O U R T, THOSE DOCUMENTS A N D MOTIONS HAVE ALREADY BEEN PREPARED. I MEAN, WE C A N S U B M I T THOSE TO THE COURT . I N T E R M S O F A F T E R REMOVAL , I F T H E R E'S ANYTHING THAT THE COURT DEEMS IS INSUFFICIENT, PLAINTIFFS ARE CERTAINLY H A P P Y T O G O BACK A N D PREPARE DECLARATIONS WITH MORE D E T A I L IF THE COURT SO DESIRES JUST T O JUSTIFY T H E CONCEALING OF T H E DOCUMENTS. T O B E C L E A R, THIS I S A N I P CASE LARGELY, SO WE 'RE TALKING ABOUT DOCUMENTS THAT REVEAL S O U R C E CODE, BOTH PLAINTIFFS A N D DEFENDANTS, TRADE SECRET SOURCE CODE AND OTHER CONFIDENTIAL PROPRIETARY INFORMATION . PART OF THIS CASE I S A B O U T C O N N E C T U A N D IT S RELATED PARTIES HACKING INTO FACEBOOK SERVERS AND STEALING DATA AND THEN SPAMMING USERS . S O SOME OF T H E D O C U M E N TS THAT A R E ATTACHED OR INCLUDED IN T H E R E C O R D ARE DOCUMENTS 9

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THAT SHOW WHAT SECURITY MEASURES FACEBOOK TOOK TO PREVENT FURTHER ACTIONS THAT THE DEFENDANTS TOOK. S O, SO -- WE CAN SHOW COMPELLING REASONS TO KEEP THIS I N F O R M A T I O N S E A L E D. SOME OF T H E O T H E R I N F O R M A T I O N I N C L U D E S FINANCIAL INFORMATION O F A PRIVATE COMPANY. FACEBOOK IS PRIVATELY HELD . IT IS NOT HELD TO THE

SAME STANDARD OF A P U B L I C COMPANY W H E R E I T'S REQUIRED TO MAKE PUBLIC DISCLOSURES F O R SECURITIES REASONS OR OTHER FINANCIAL INFORMATION . T H E INFORMATION HAS BEEN KEPT PRIVATE BY FACEBOOK A N D F A C E B O O K W O U L D JUST LIKE TO CONTINUE TO KEEP THAT PRIVATE F O R A VARIETY OF REASONS, NOT T H E L E A S T O F W H I C H I S C O M P E T I T I V E HARM THAT IT MIGHT FACE. A N D SO WE WOULD BE PREPARED TO FILE

DECLARATIONS I N SUPPORT OF THAT AS WELL. T H E R E'S ALSO PRIVATE COMMUNICATIONS A M O N G SOME OF THE PRINCIPALS AT FACEBOOK AND THEIR FORENSIC COLLEGIANS AND OTHER F A M I L Y MEMBERS A N D THOSE HAVE A CONSTITUTIONA L RIGHT O F PRIVACY THAT WE WOULD LIKE TO PROTECT A N D AGAIN WE COULD SUBMIT A DECLARATION DETAILING THAT AS WELL. I N T E R M S O F T H E TRANSCRIPT, WHILE THE RIGHT M A Y HAVE A GENERAL R I G H T T O A C C E S S TO PUBLIC PROCEEDINGS , I T I S NOT ABSOLUTE. I T I S A QUALIFIED 10

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RIGHT . A N D IN ORDER TO HAVE WHOLESALE UNSEALING OF T H E R E C O R D, THEY NEED T O SHOW THAT THAT - - THAT T H E SEALING D I D N O T, D I D N O T SERVE A COMPELLING INTEREST A N D THAT THERE W A S N O ALTERNATIVE M E A N S. A N D THE PROPOSED TRANSCRIPT THAT T H E COURT H A S OFFERED IS NARROWLY TAILORED TO PROTECT FACEBOOK 'S AND DEFENDANT'S , Q U I T E FRANKLY , PRIVATE INFORMATION FROM THE SETTLEMENT AGREEMENT A N D T H E SETTLEMENT DISCUSSIONS. I T'S , I T'S VERY NARROWLY TAILORED SO AS NOT T O UNNECESSARILY IMPEDE O N FREE ACCESS T O WHAT HAD HAPPENED A T THE HEARING. SO TO ARGUE THAT NO

MORE OF IT NEEDS TO BE RELEASED THEN T H E COURT HAS PROPOSED . T H E MOTION IN T H E RELATED P A P E R S W E READILY ADMITTED IN OUR OPPOSITION THAT W E W O U L D B E HAPPY TO GO BACK AND U N S E A L MANY OF T H E DOCUMENTS. A T T H E OUTSET , WHEN T H E M O T I O N TO ENFORCE W A S F I L E D, THE PARTIES HAD AT THAT TIME A G R E E D TO KEEP EVERYTHING CONFIDENTIAL. THIS CASE HAS G O T T E N

WIDE MEDIA ATTENTION AND I N ORDER T O FACILITATE A WRAP- UP OF EVERYTHING A N D GET T H E DISMISS AL ON FILE, T H E PARTIES H A D A G R E E D TO KEEP EVERYTHING CONFIDENTIAL S O EVERYTHING G O T P U T UNDER SEAL. 11

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A N D THERE' S OBVIOUSLY LOTS O F EXHIBITS A N D T H I N G S THAT C A N BE UNSEALED AT THIS P O I N T N O W THAT THE SETTLEMENT IS OUT A N D T H E AGREEMENT H A S LARGELY BEEN R E L E A S E D T O T H E PUBLIC AS WELL. B U T THERE ARE STILL DOCUMENTS THAT A R E APART OF THAT RECORD THAT NEED T O R E M A I N SEALED , AGAIN IT 'S PRIVATE I N F O R M A T I O N BELONGING TO FACEBOOK THEY WOULD HAVE NEVER RELEASED T O THE P U B L I C B U T FOR THEIR NEED TO DEFEND THEMSELVES IN THIS MOTION TO ENFORCE AND THEY RELIED ON T H E PROTECTIVE ORDER IN RELEASING SOME OF THE INFORMATION . A N D WHAT I 'M THINKING OF IN PARTICULARLY IS T H E PRIVATE VALUATION O F T H E COMPANY A S WELL AS AN INTERNAL C O M M O N S T O C K AGREEMENT THAT F A C E B O O K USES WITH ITS EMPLOYEES . T H O S E A R E NOT DOCUMENTS THAT WOULD HAVE BEEN RELEASED INTO T H E PUBLIC B U T F O R THE M O T I O N T O ENFORCE AND A RELIANCE ON A PROTECTIVE ORDER . THERE ALSO ARE SOME DECLARATIONS THAT CONNECTU PUT INTO THE RECORD THAT DISCLOSED THINGS THAT HAPPENED AT THE MEDIATION O R P U R P O R T E D L Y OCCURRED AT T H E MEDIATION AND THOSE HAVE THEIR OWN PROTECTIONS UNDER A. D.R . L O C A L RULE 6- 11. T H E PARTIES A R E NOT PERMITTED T O 12

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DISCLOSE , T O D I S C L O S E WHAT HAPPENED OR WHAT WAS SAID AT THE MEDIATION A N D CONNECTU IMPROPERLY P U T THOSE INTO THE R E C O R D. AND S O T O UNSEAL THEM WOULD

N O T ONLY VIOLATE THE MEDIATION PRIVILEGE, IT GOES AGAINST THE PARTY 'S AGREEMENT TO KEEP THINGS CONFIDENTIAL B U T ALSO V I O L A T E S A .D. R. LOCAL RULE 6- 11 AND SO WE WOULD A S K THAT THOSE R E M A I N S E A L E D. A N D AGAIN, WE A R E H A P P Y T O G O BACK A N D PREPARE DECLARATIONS DESCRIBING THE INFORMATION W H Y THIS INFORMATION SHOULD BE S E A L E D. T H E COURT: VERY WELL. ANYONE ELSE WANT

TO SPEAK TO THIS MATTER ? M R. MYERS: I' M S O R R Y, GO AHEAD. M R. BARRETT: YOUR HONOR, DAVID BARRETT YOUR HONOR , COULD I BRIEFLY?

FROM BOIES, SCHILLER & FLEXNER REPRESENTING CONNECTU A N D I WILL SPEAK BRIEFLY A N D IN RESPONSE TO A COUPLE OF T H I N G S THAT MS . S U T T O N SAID. CONNECTU I S NOT REQUESTING THAT THE COURT R E D A C T A N Y MORE THAN WE UNDERSTAND THE COURT IS PREPARED TO DO . C O N N E C T U I S T A K I N G NO POSITION ON WHETHER T H E REDACTIONS THAT THE COURT WE UNDERSTAND MAY BE MAKING ARE APPROPRIATE BECAUSE W E UNDERSTAND THAT THAT DETERMINATION I N V O L V E S BALANCING BY THE COURT 13

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OF CONFIDENTIALITY R I G H T S AND P U B L I C INTERESTS. W E D I D NOTE THAT , THAT SOME OF THE REDACTIONS IN THE TRANSCRIPT SEEM T O G O B E Y O N D THE REDACTIONS THAT T H E COURT HAD MADE IN THE TERM SHEET AND INDEED I THINK G O SOMEWHAT BEYOND WHAT MS . S U T T O N WAS SUGGESTING FACEBOOK WAS SEEKING IN TERMS OF REDACTION. A S T H E COURT WILL R E C A L L, WHEN YOU REDACTED T H E TERM SHEET IN YOUR ORDER LAST WEEK , ESSENTIALLY THE ONLY THINGS THAT WERE REDACTED WERE NUMBERS. A N D AS WE UNDERSTAND T H E PROPOSED REDACTIONS IN THE TRANSCRIPT, THEY GO BEYOND NUMBERS AND COVER , I BELIEVE IT' S FAIR TO S A Y, SOME SUBSTANTIVE ARGUMENTS. M S. SUTTON REFERRED TO T H E PRIVATE VALUATION O F THE COMPANY. NUMBER. THAT' S OBVIOUSLY A

I' M N O T SURE WHAT S H E M E A N T B Y I N T E R N A L

COMMON STOCK AGREEMENT. OBVIOUSLY THE TERM SHEET, WHICH IS ALREADY PUBLIC , DOES IDENTIFY SOME RESTRICTIONS THAT WILL G O WITH THE STOCK I F THE SETTLEMENT AGREEMENT I S ULTIMATELY ENFORCED . A N D THE THIRD THING S H E MENTIONED IS DISCLOSURE OF EVENTS RELATING TO T H E MEDIATION, A N D 14

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I DID JUST WANT T O S A Y A WORD ABOUT THAT BECAUSE SHE SAID THAT CONNECTU IMPROPERLY PUT THOSE MATTERS RELATING TO T H E MEDIATION INTO T H E RECORD . A N D I D O D I SA G R E E WITH THAT FOR T W O REASONS. F I R S T O F A L L, AS WE A R G U E D, ALTHOUGH I UNDERSTAND THE COURT W A S N O T PERSUADED IN I T S OPINION, AS WE A R G U E D, THERE IS AN EXCEPTION TO T H E MEDIATION PRIVILEGE THAT I S EXPRESSED IN THE LOCAL A. D.R . RULE . W E ALSO A R G U E D THAT IT C A N B E O V E R C O M E O R IS OVERCOME BY T H E SECURITIES A C T O F 1 934 BY PROVISIONS OF THAT A C T BARRING SECURITIES FRAUD . SO WE THINK IT W A S N O T IMPROPER FOR THAT REASON . AND SECONDLY, SECONDLY , I N PARTICULAR , I N THIS CASE, AS WE ARGUED , A N D THE R E A S O N THAT WE P U T IN T H E S E C O N D DECLARATION FROM M R. WINKLEVOSS, WHICH D I D DISCUSS MATTERS IN THE MEDIATION, WAS BECAUSE IN FACEBOOK' S R E P L Y B R I E F I N SUPPORT OF T H E M O T I O N T O ENFORCE , THEY MADE THE STATEMENT THAT , THAT CONNECTU HAD N O T MADE A N Y PROFFER OF WHAT HAPPENS IN THE MEDIATION A N D THAT W E W O U L D LIKE TO SHOW THE COURT IN ORDER TO FURTHER SUPPORT O U R CLAIM OF SECURITIES FRAUD. A N D, YOUR HONOR, I WOULD SUBMIT THAT WHEN 15

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FACEBOOK MADE THAT STATEMENT IN EFFECT S A Y I N G O N E OF T H E REASONS THAT YOU S H O U L D R E J E C T OUR DEFENSE W A S BECAUSE WE HADN' T TOLD Y O U A N Y T H I N G THAT HAPPENED IN T H E MEDIATION THAT W O U L D SUPPORT A SECURITIES FRAUD CLAIM, THAT WAS A -- IN FACT, THEY SAID, THEY SAID, YOUR H O N O R, WE HAVE N O E V I D E N C E O F ANYTHING THAT HAPPENED IN THE MEDIATION THAT WOULD SUPPORT A SECURITIES FRAUD CLAIM . WHEN THEY MADE THAT ARGUMENT , THAT WAS EFFECTIVELY A WAIVER A N D W E WERE ENTITLED TO D E F E N D AGAINST THAT A R G U M E N T B Y PUTTING IN THAT EVIDENCE. THAT 'S, PERHAPS, A BIT OF A LONG W I N D E D W A Y O F S A Y I N G THAT I D O N'T THINK THAT THERE WAS ANYTHING IMPROPER ABOUT THAT DECLARATION BEING PUT IN , I N L I G H T O F T H E -- IN LIGHT OF THOSE FACTORS. N O W, THAT MAY BE A DIFFERENT QUESTION FROM WHETHER T H E COURT BELIEVES AT THIS S T A G E O F T H E P R O C E E D I N G S A N D IN LIGHT OF CN E T'S M O T I O N, WHETHER IT IS APPROPRIATE TO DISCLOSE INFORMATION ABOUT WHAT OCCURRED IN THE MEDIATION A N D I RECOGNIZE THAT THAT' S A DIFFERENT I S S U E. BUT EVEN HAVING SAID THAT , I T DID APPEAR THAT SOME O F THE REDACTIONS I N THE TRANSCRIPT WERE -- DID N O T INVOLVE MATTERS THAT H A D ANYTHING TO DO WITH THE MEDIATION. THEY INVOLVED 16

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SUBSTANTIVE MATTERS THAT C A N BE DISCUSSED WITHOUT A N Y DISCLOSURE OF WHAT HAPPENED IN THE MEDIATION. T H A N K Y O U, YOUR HONOR. T H E COURT: M R. MYERS: BRIEFLY . Y E S, YOUR HONOR. I T'S N O T

O U R B U R D E N; IT 'S THEIR BURDEN .

AND I' M ONLY N O W

TALKING ABOUT THE TRANSCRIPT AND T H E M O T I O N AND I' M NOT TALKING ABOUT ALL THE OTHER RECORDS - - W E CAN TALK ABOUT -- NOBODY WANTS THEIR SOURCE CODE . WHEN THIS GETS REFERRED T O THE MAGISTRATE AND THEY SUBMIT A DECLARATION SAYING DOCUMENT X X CONTAINS O U R S O U R C E CODE A N D WE WANT I T R E D A C T E D, A N D THAT 'S FINE. MICROSOFT CASE . THAT HAPPENED IN THE S U N THAT'S A TRADE SECRET , A N D NO ONE

HAS A PROBLEM WITH THAT . I T GETS A LITTLE SQUISHY WHEN YOU TALK ABOUT CONFIDENTIAL INFORMATION BECAUSE I IMAGINE FROM THE COURT 'S OWN EXPERIENCE IT KNOWS THAT T H E PARTIES TEND T O B E OVER ZEALOUS I N DEFINING WHAT THEY BELIEVE T O B E THEIR CONFIDENTIAL INFORMATION. A N D THAT I S W H Y THE C O U R T S REQUIRE A SHOWING, T H E COMPELLING INTEREST TEST, F O R T H E TRANSCRIPT AND T H E COMPELLING NEEDS TEST, WHICH REQUIRES A SHOWING O F - - N O T JUST THAT IT 'S CONFIDENTIAL B U T COMPETITIVE HARM A N D THEY C A N' T 17

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JUST COME I N A N D SAY , WELL , W E'L L D O I T.

THEY HAD

A CHANCE TO DO IT A N D I N WHAT THEY FILED ON MONDAY . THEY HAD T H E WEEKEND . DECLARATION IN . THEY COULD HAVE PUT THE

THEY DIDN 'T.

THEY COULD HAVE PUT O N E I N B E F O R E THE HEARING WAS C L O S E D, AND THEY DIDN'T DO THAT EITHER . THERE 'S BEEN N O SHOWING THAT WOULD JUSTIFY A N Y REDACTION O F T H E HEARING O R A N Y REDACTION OF T H E P A P E R S REGARDING THE M O T I O N T O ENFORCE . A N D EVERYTHING ELSE WE AGREE C A N B E REFERRED TO T H E MAGISTRATE A N D THEY C A N MAKE A SHOWING ON THOSE DOCUMENTS . WITH RESPECT TO TIMING , W E PROPOSE T W O W E E K S. WE 'RE FINE WITH B I F U R C A T I N G THAT A N D

N O T DEALING WITH ANY OF T H E DOCUMENTS THAT WERE IN T H E S U P E R I O R C O U R T B E F O R E IT WAS REMOVED. N O W WE CAN MAYBE DO THAT LATER, ANOTHER T W O W E E K S DOWN T H E ROAD , B U T WE PROPOSE T W O WEEKS. A N D THE A. P. CASE THAT WE CITED , T H E NINTH CIRCUIT CASE W E CITED I T GAVE THE PARTIES THREE DAYS BECAUSE T H E COURT HAD S E A L E D EVERYTHING . I T SAID Y O U SHOULDN 'T BE DOING THIS A N D Y O U HAVE TO GO BACK AND LOOK AT THIS. WE 'RE GOING

TO FILE MOTIONS T O JUSTIFY T H E SEALING B U T Y O U HAVE THREE DAYS. S O W E'R E PROPOSING TWO WEEKS . 18

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THEY , I THINK , HAVE NOT PROPOSED ANY TIMEFRAME S O W E'R E OPEN TO TALKING ABOUT IT, B U T W E WOULD PROPOSE TWO WEEKS . T H E COURT: WELL , I -- UNLESS Y O U HAVE

SOMETHING THAT IS BURNING, I THINK I HAVE A, A -WELL, I SHOULDN'T S A Y S O L U T I O N. I HAVE A N ORDER

THAT I C A N MAKE THAT IN MY MIND DOES A PROPERLY , A PROPERLY BALANCE AND MR . BARRETT 'S COMMENT THAT BALANCING I S THE WATCH WORD O F THIS WHOLE PROCESS A N D I 'LL ISSUE THAT AS SOON A S I LEAVE T H E B E N C H. I N THAT ORDER I DO RECOGNIZE T H E NEED F O R BALANCING BECAUSE THERE ARE COMPETING INTERESTS HERE. AND I THINK A S THE PARTIES HAVE ADEQUATELY POINTED O U T, THERE A R E DIFFERENT CONCERNS THAT ATTACH TO A CONFIDENTIALITY THAT IS INHERENT IN TRADE SECRETS AND T H E TRADITIONA L K I N D S OF MATERIAL THAT CAN BE HELD IN CONFIDENCE, EVEN I N T H E CONTEXT OF A LITIGATION I N A P U B L I C F O R U M SUCH AS THIS COURT. THE REASON THIS CASE I S ONE THAT I HAVE GIVEN A GREAT DEAL O F ATTENTION TO IS BECAUSE A S A COURT WE ENCOURAGE PARTIES TO E N G A G E I N MEDIATION A N D RESOLUTION OF DISPUTES . T H E PUBLIC H A S A D I R E C T BENEFIT IN THAT 19

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PROCESS.

A N D SO COURT ANNEXED MEDIATION IS A VERY

IMPORTANT PART OF H O W W E D O B U S I N E S S A S A COURT A N D MY PREDECESSOR -- I ACTUALLY TOOK T H E SEAT O F ROBERT PECKHAM . I'M HONORED TO HAVE DONE SO . HE

PIONEERED C O U R T ANNEXED MEDIATION A N D IN THE INTEREST OF THIS COURT IN THE ALTERNATIVE DISPUTE RESOLUTION. S O WHEN T H E PARTIES GO O U T T O A .D. R. AND COME TO WHAT THEY R E G A R D A S A CONFIDENTIAL SETTLEMENT AND COME BACK T O T H E COURT WITH A M O T I O N TO ENFORCE THAT CONFIDENTIAL SETTLEMENT, IT' S PART OF WHAT WE DO AS A C O U R T I S T O RESPECT THAT CONFIDENTIALITY. A N D I HAVE BEEN MOTIVATED BY A REQUEST B Y T H E PARTIES TO RESPECT THE CONFIDENTIALITY O F T H E SETTLEMENT. A T T H E SAME TIME IT 'S NECESSARY TO I N V A D E SOME OF THE DETAILS OF THAT SETTLEMENT IN ORDER TO DO WHAT THE PARTIES HAVE A S K E D T H E COURT TO DO AND THAT IS TO ENFORCE T H E SETTLEMENT. I T I S TRUE THAT THERE HAS BEEN A DISPOSITIVE M O T I O N MADE TO T H E C O U R T I N T H E FORM O F THIS MOTION TO ENFORCE THE SETTLEMENT, B U T T H E CASE H A S N O T BEEN D I S P O S E D O F B Y T H E MOTION BECAUSE AS I LOOK AROUND T H E ROOM I DON 'T HAVE AGREEMENT FROM 20

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EVERYONE THAT WHAT I 'M DOING IS THE CORRECT THING. SO T H E W H O L E LITIGATION M A Y R E S U M E AND IF I TAKE A C T I O N I N T H E COURSE OF THIS, WHICH OPENS UP TO P U B L I C S C R U T I N Y MATTERS THAT THE PARTIES HAVE S O U G H T T O S H I E L D IN THE C O U R S E O F T H E I R LITIGATION , I, PERHAPS, WILL PUT THEM IN A D I SADVANTAGE IF THE LITIGATION WERE T O CONTINUE. O N E OF THE T H I N G S THEY S O U G H T T O PROTECT IN THEIR CONFIDENTIAL SETTLEMENT , I PRESUME, IS A N Y PUBLIC D I SCOURSE ABOUT THEIR MOTIVATION T O SETTLE A N D A N Y CHARACTERIZATION O F O N E OR THE OTHER . B U T IN THE C O U R S E O F T H E MOTION TO C O M P E L T H E M O T I O N OF NECESSITY , I H A D T O A S K QUESTIONS ABOUT MATTERS THAT THEY OTHERWISE WOULD KEEP CONFIDENTIAL. A N D, AGAIN , I AM MINDFUL OF THAT WITH RESPECT TO A M O T I O N SUCH A S T H E ONE BEING MADE BY T H E C O U R T T O U N S E A L SO THAT T H E PUBLIC C A N G E T INTO THOSE PRIVILEGED MATTERS THAT THEY OTHERWISE WOULD KEEP CONFIDENTIAL AND THE PARTIES COULD HAVE CHOSEN TO ENFORCE THEIR SETTLEMENT B Y G O I N G T O FURTHER PRIVATE MEDIATION A N D KEPT IT O U T O F T H E PUB LIC FORUM ALL TOGETHER. B U T HAVING CHOSEN T H E COURT, THEY HAVE ACTUALLY C H O S E N A P U B L I C F O R U M, BUT AT T H E SAME 21

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TIME I THINK W E CAN RECONCILE THE INTEREST O F THE P U B L I C THROUGH T H E M E D I A O R OTHERWISE TO HAVE ACCESS T O INFORMATION THAT DOESN 'T VIOLATE T H E KIND OF PRIVILEGE THAT T H E PARTIES THOUGHT THEY WERE ENJOYING BY C O M I N G T O A CONFIDENTIAL SETTLEMENT . A N D SO I WILL PARSE BETWEEN THE VARIOUS MATTERS HERE. THE TRANSCRIPT I HAVE GONE THROUGH

AND REDACTED PORTIONS O F I T WHICH SPEAK T O THE FINANCIAL DISCLOSURES THAT THEY MADE T O EACH OTHER ON A CONFIDENTIAL BASIS . B U T TO MR. BARRETT' S P O I N T THAT MY REDACTIONS ARE MORE EXTENSIVE THAN THAT, WHAT I HAVE TRIED TO DO WAS TO PROTECT THE CONFIDENTIALITY OF T H E GIVE A N D TAKE IN T H E SETTLEMENT DISCUSSIONS A N D S O I -- MY REDACTIONS WERE REFLECTIVE OF AN ATTITUDE THAT UNTIL THE PARTIES THEMSELVES VOLUNTARILY D E C I D E THAT THOSE MATTERS SHOULD BE P U T IN T H E P U B L I C RECORD , I HAVE BEEN MORE -- I HAVE BEEN CAUTIOUS ABOUT PUTTING T H O S E MATTERS INTO THE PUBLIC. THAT TRANSCRIPT WAS O N E W H E R E I INVITED T H E PARTIES TO COME TO COURT AND SPEAK TO ME CANDIDLY IN A CLOSED FORUM ABOUT WHAT HAD HAPPENED . A N D I GUESS N O W I HAVE TO ASSURE THEM THAT I WOULD RESPECT THE CONFIDENTIALITY THAT I TOLD THEM THAT I 22

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WOULD GIVE THEM I N HAVING THAT HEARING AND I T PUTS THE COURT I N A DIFFICULT POSITION T O B E NOW MAKING A JUDGMENT THAT, WELL, I TOLD Y O U I T W A S CONFIDENTIAL A N D SEALED B U T N O W I'M GOING TO MAKE IT P U B L I C. T H E INTEGRITY OF T H E C O U R T C A N BECOME INVOLVED IF PARTIES WHO GO B E F O R E T H E COURTS A R E ASSURED THAT I T'S A SEALED CONFIDENTIAL PROCESS ONLY TO LATER FIND THAT IT IS N O T. N O W, T H E L A W ALLOWS T H E C O U R T T O EXERCISE ITS DISCRETION WITHIN LIMITS. T H E R E A R E STANDARDS A N D I DO I N T E N D T O RESPECT THOSE STANDARDS IN WHAT I, WHAT I -- IN T H E ORDER THAT I'M GOING TO MAKE WITH RESPECT TO THIS MATTER. S O YOUR ARGUMENT THAT I S H O U L D ACT QUICKLY IS ONE THAT I A M MINDFUL OF . M R. MYERS, I WILL, AS I SAID , I S S U E M Y ORDER AS SOON AS I'M O F F T H E BENCH. I WILL DIRECT THE COURT REPORTER T O FILE A REDACTED TRANSCRIPT S O THAT THAT IS AVAILABLE A N D WITH RESPECT T O THE PREMOTION MATTERS THAT WERE FILED UNDER SEAL, AT T H E O R D E R O F O T H E R J U D G E S, I G O T THIS CASE ON THE M O T I O N WITH RESPECT TO THE SETTLEMENT AND THESE O R D E R S WERE MADE PRIOR TO MY 23

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INVOLVEMENT IN T H E CASE A N D I D O N'T HAVE A B A S I S F O R, AT THIS P O I N T, MAKING A N Y J U D G M E N T A B O U T T H O S E MATTERS. T H E R E A R E STANDARDS THAT AFFECT THAT, A N D I DO INTEND TO REFER THOSE MATTERS TO A MAGISTRATE JUDGE TO -- IF THERE A R E FURTHER REQUESTS MADE FOR OPENING TO PUBLIC SCRUTINY T H E DOCUMENTS THAT HAVE BEEN PREVIOUSLY S E A L E D BY THE COURT . S O WITH THAT THE M O T I O N T O INTERVENE FOR T H E LIMITED PURPOSE OF MAKING THIS MOTION IS GRANTED. A N D THE M O T I O N T O U N S E A L WILL B E GRANTED TO T H E LIMITED E X T E N T THAT I HAVE N O W INDICATED . M R. MYERS: CLARIFICATION? T H E COURT: M R. MYERS: CERTAINLY. WITH RESPECT TO THE DOCUMENTS CAN I ASK A POINT OF

THAT HAVE BEEN FILED , I S T H E COURT TREATING THE MOTION - T H E COURT: M R. MYERS: WHICH DOCUMENTS? WELL , THAT 'S MY QUESTION. IS

T H E C O U R T T R E A T I N G T H E MOTION TO ENFORCE THE SETTLEMENT AS PART O F A L L OF THE OTHER RECORDS THAT WILL BE REFERRED TO THE MAGISTRATE OR ARE THOSE GOING TO BE RELEASED WITH THE TRANSCRIPT OR SHORTLY 24

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THEREAFTER? T H E COURT: KNOW. WELL , GOOD QUESTION . I D O N' T

I WOULD R E G A R D T H E MOTION THAT WAS FILED

UNDER SEAL IN A DIFFERENT CATEGORY THAN T H E OTHER RECORDS BECAUSE I T WAS FILED PARTICULARLY WITH RESPECT TO A CONFIDENTIAL SETTLEMENT. AND THAT HAS A PRIVILEGE THAT ATTACHES T O IT THAT IS DIFFERENT THAN THE PRIVILEGES THAT M I G H T APPLY TO OTHER MATTERS. S O I DO I N T E N D T O T R E A T I T D I F F E R E N T L Y. I HAVEN 'T DECIDED WHETHER OR N O T I WILL GIVE THAT T O T H E MAGISTRATE J U D G E O R KEEP IT M Y S E L F B U T T H E TRANSCRIPT WILL -- T H E R E D A C T E D TRANSCRIPT WILL BE AVAILABLE . M R. MYERS: PUBLIC COURT FILE ? FROM THE FILE? T H E COURT: T H E COURT REPORTER HAS A A N D THAT WILL GO TO T H E THEY WILL BE ABLE TO GET IT

PROCESS THAT S H E USES T O MAKE THAT AVAILABLE TO T H E P U B L I C A N D I WILL D I R E C T H E R TO, TO FILE -- IT' S DONE THROUGH SOME ELECTRONIC FORM A N D YOU NEED A C C E S S T O I T, BUT I' LL DIRECT H E R T O FILE A REDACTED TRANSCRIPT. M R. MYERS: T H E COURT: T H A N K Y O U, YOUR HONOR. T H A N K Y O U ALL . 25

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Y O U.

W E'L L G O N O W TO THE OTHER M O T I O N THAT IS B E F O R E T H E COURT HAVING TO DO WITH THE ORDER TO SHOW CAUSE WHY A JUDGMENT SHOULD BE ENTERED OR NOT BE ENTERED AS THE CASE MAY BE . A N D WITH RESPECT TO THAT, I RECEIVED SUBMISSIONS FROM BOTH S I D E S. I PRESUME THAT THE

SUBMISSION BY THE DEFENDANTS CONNECTU AND O T H E R S A R E SUBMITTED WITHOUT WAIVING YOUR OBJECTION TO MY ORDER IN T H E F I R S T P L A C E. M R. BARRETT: THAT IS CORRECT. THANK

WE A R E, YOUR H O N O R, AS YOU S A Y, ADDRESSING

T H E FORM OF T H E J U D G M E N T A N D WE RESERVE O U R RIGHTS TO CONTEST THE ORDER A N D T H E JUDGMENT AS MAY BE APPROPRIATE . T H E COURT: HERE 'S WHAT I INTEND T O D O,

A N D M A Y B E THAT WOULD BE F A S T E R T O HAVE Y O U ADDRESS WHAT I I N T E N D TO DO AS OPPOSED T O WHAT Y O U W O U L D WANT ME TO DO. I HAVE READ YOUR SUBMISSIONS . SUBSTANTIALLY THE SAME. THEY ARE

A N D SO THE FORM OF THE

JUDGMENT I THINK COULD COMPLY WITH YOUR SUBMISSIONS . T H E R E A R E A C O U P L E OF ASPECTS O F I T THAT I WANT T O ADDRESS . F I R S T, IT WILL B E NECESSARY FOR SOME 26

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INTERMEDIARY T O A C T IN A C A P A C I T Y T O COLLECT INFORMATION A N D MOVE T H I N G S A R O U N D AND TO DO CERTAIN THINGS TO CARRY O U T T H E COURT' S J U D G M E N T. R A T H E R THAN A C C E P T THE SUBMISSION BY ONE OF T H E PARTIES THAT A P A R T Y S E L E C T THAT P E R S O N AND P A Y F O R THAT PROCESS , M Y I N T E N T IS TO APPOINT A SPECIAL MASTER W H O W O U L D BEHOLDE N T O T H E COURT, TAKE DIRECTIONS FROM T H E C O U R T A N D NO ONE ELSE, WITH RESPECT T O A COLLECTION OF THE VARIOUS DEPOSITS MANDATED BY T H E J U D G M E N T A N D WITH RESPECT TO A N Y DISBURSEMENTS OR FILINGS THAT W O U L D COME ALONG WITH THAT A N D HAVE T H E PARTIES P A Y THE COST OF THAT PROCESS EQUALLY . I T I S ALSO MY I N T E N T T O THEN HAVE THE JUDGMENT REQUIRE THE M A S T E R T O COLLECT T H E VARIOUS CERTIFICATES O R CASH OR OTHER CONSIDERATION TO COLLECT RATHER THAN DEEM THAT THERE HAS BEEN RELEASES TO ACTUALLY COLLECT A SUBMISSION OF A RELEASE. I DO I N T E N D T O PROVIDE THAT THAT RELEASE H A S T O B E SUBMITTED TO THE COURT F O R I T S APPROVAL A N D THEN IT WOULD BE DEPOSITED WITH T H E M A S T E R SO THAT WOULD LEAVE TO THE COURT A N D N O O N E ELSE T H E DETERMINATION AS TO WHETHER O R N O T THE RELEASE IS CONSISTENT WITH T H E LANGUAGE OF THE SETTLEMENT 27

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AGREEMENT WHICH PROVIDES A S BROAD A S POSSIBLE. C A N'T RECALL T H E EXACT WORDS. I WOULD ALSO HAVE THE PARTIES SUBMIT A

I

LEGALLY SUFFICIENT DISMISS AL OF ALL CASES A N D THEN I WOULD MAKE SUBSEQUENT O R D E R S WITH RESPECT TO THEN WHAT THE M A S T E R DOES WITH RESPECT T O T H E EXCHANGE OF THOSE DOCUMENTS. T H E R E I S A L E G E N D W H I C H W A S SUGGESTED BY O N E O F T H E PARTIES W H I C H W O U L D B E P L A C E D ON STOCK CERTIFICATES A N D SO I NEED TO HEAR FROM T H E PARTIES WITH RESPECT T O WHETHER Y O U HAVE A N Y OBJECTION TO THE JUDGMENT AND INCORPORATING THAT LEGEND. T H E R E I S A REQUEST IN THE VARIOUS SUBMISSIONS THAT THE COURT SPEAK TO VARIOUS ASSETS , PARTICULARLY W E B SITES AND THOSE TYPES OF T H I N G S. THERE W A S NOTHING ABOUT THAT IN THE SETTLEMENT AGREEMENT I T S E L F, A N D S O T H E COURT IS DISPOSED TO LEAVE THAT TO MATTERS O F O R D I N A R Y B U S I N E S S TRANSACTIONS THAT F O L L O W T H E ENFORCEMENT OF THE SETTLEMENT AND T H E EXCHANGES THAT A R E REQUIRED IN THE SETTLEMENT . I AM CONCERNED THAT IN ORDER TO BE EFFECTIVE I N ITS ENFORCEMENT, THE COURT SHOULD I M P O S E O N T H E PARTIES A REQUIREM ENT THAT THEY N O T TAKE ANY A C T I O N W H I C H W O U L D INTERFERE WITH T H E 28

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ABILITY TO FULFILL T H E TERMS OF THE AGREEMENT A N D I DIDN' T KNOW H O W F A R TO GO WITH RESPECT TO THAT. A N D THEN T H E COURT DOES I N T E N D TO RETAIN JURISDICTION T O ENFORCE T H E J U D G M E N T, AND I THINK THAT IS ALSO I N H E R E N T I N T H E AGREEMENT I T S E L F T O R E T A I N JURISDICTION GIVEN TO IT BY THE PARTIES TO ENFORCE THE TERMS OF T H E AGREEMENT ITSELF . A L L RIGHT. S O WITH THAT LET ME PAUSE A N D

S E E I F T H E PARTIES WISH TO SPEAK FURTHER. M R. CHATTERJEE: YOUR HONOR, IF I MAY .

NEEL CHATTERJEE F O R FACEBOOK AND MARK ZUCKERBERG. WE ALSO DIDN'T DO APPEARANCES F O R THIS M O T I O N. I SAW YOU MIGHT HAVE LOOKED COMPLEX A T THE GENTLEMAN STANDING RIGHT NEXT T O M E AND I THOUGHT IT MIGHT BE GOOD T O HAVE APPEARANCES . M R. VAN D A L S E M: QUINN EMANUEL. BRUCE VAN DALSEM FROM

W E'R E LIEN CLAIMANT IN T H E CASE . I APPRECIATE THAT Y O U ARE N O W I D I D NOT I N T E N D T O I N M Y

T H E COURT: IDENTIFYING YOURSELF .

STATEMENT S A Y ANYTHING ABOUT THE LIEN CLAIMANT THAT H A S COME TO MY ATTENTION. S O F A R AS THE COURT IS KNOWLEDGEABLE, THERE H A S BEEN A NOTICE OF A LIEN THAT I HAVE SEEN , B U T I D O N'T KNOW THE BONA FIDES OF IT. I T DOES

SEEM TO ME THAT A N Y EFFECT THAT THAT W O U L D HAVE ON 29

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MY JUDGMENT , I T H A S TO BE SOMEHOW A D J U D I C A T E D I N SOME WAY , U N L E S S THE PARTIES STIPULATE TO H O W T O HANDLE I T. I DO I N T E N D THAT H A V I N G F I L E D I T, YOU M A Y INTERJECT YOURSELF I N THE PROCESS SOMEHOW . I HAVEN 'T FIGURED O U T WHAT THAT IS F O R PURPOSES OF M A K I N G SURE THAT, THAT ANY , A N Y -- THAT O U R DISBURSEMENTS A R E CONSISTENT WITH ANY CLAIM THAT YOUR CLIENT WOULD MAKE. M R. VAN D A L S E M: YOUR HONOR, IF T H E C O U R T

WOULD ENTERTAIN I T, I W O U L D LIKE TO SPEAK TO THOSE ISSUES WHEN APPROPRIATE . T H E COURT: SURE , I N DUE COURSE . AND

MAYBE THIS IS THE POINT , B U T I W A N T E D TO GIVE A T LEAST T H E PARTIES TO T H E LITIGATION AN OPPORTUNITY TO COMMENT ON THE FORM OF THE JUDGMENT I INTEND TO FILE. M R. CHATTERJEE: THANK Y O U, YOUR H O N O R.

A N D T H E ONE OTHER THING I JUST W A N T E D TO RAISE IS THAT I D I D RECEIVE A N E -MAIL TWO DAYS AGO FROM THE FINNEGAN HENDERSON FIRM MAKING A N ASSERTION THAT THEY MAY ALSO FILE F O R A LIEN AGAINST ANY PROCEEDS IN THIS CASE. THEY HAVEN' T F I L E D ANYTHING WITH T H E

COURT , B U T IT' S O F CONCERN TO US BECAUSE FACEBOOK WANTS TO MAKE SURE THAT ONCE THEY HAVE GIVEN T H E 30

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CONSIDERATION, THERE IS NOTHING HANGING O U T THERE A N D SOMEONE C A N T R Y ASSERT AGAINST FACEBOOK AND T H E OTHER INDIVIDUALS W H O A R E SETTLING IN THIS CASE . PERHAPS -- I SEE MR . M O S K O S T A N D I N G U P. PERHAPS HE CAN ADDRESS THAT I S S U E. T H E COURT: M R. MOSKO: COUNSEL . Y E S, SCOTT MOSKO , YOUR HONOR ,

REPRESENTATIVE OF A L L O F T H E DEFENDANTS HERE AS WELL AS ONE OF T H E P A R T N E R S A T F I N N E G A N HENDERSON. T H E COURT SHOULD BE AWARE THAT, IN FACT, FINNEGAN HENDERSON HAS PERFECTED LIENS WITH RESPECT TO THIS MATTER . F I N N E G A N HENDERSON IS NOT T A K I N G T H E SAME POSITION AS QUINN EMANUEL. I UNDERSTAND THE COURT DOES NOT I N T E N D T O MAKE ANY REFERENCE T O T H E LIENS IN THE JUDGMENT A N D WITH RESPECT T O THAT FINNEGAN HENDERSON I S FINE . W E I N T E N D TO WORK CLOSELY WITH OUR C L I E N T AND BELIEVE THAT THAT MATTER WILL B E RESOLVED WITHOUT ANY KIND OF A REFERENCE TO THE LIENS IN T H E JUDGMENT . AND WITH RESPECT T O THAT , I HAVE NOTHING

MORE TO SAY . M R. CHATTERJEE: SO , U M - - T H A N K Y O U.

YOUR HONOR , A S T O T H E ESCROW AGENT OR SPECIAL MASTER , W H I C H I 'LL ADDRESS -- IS THE POINT 31

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I' LL ADDRESS F I R S T. T H E STRUCTURE THAT WAS P U T I N P L A C E, AT LEAST FROM FACEBOOK' S P E R S P E C T I V E A S F A R AS HAVING THIS SPECIAL M A S T E R ADMINISTER H O W TO RELEASE F U N D S OR STOCK A N D H O W TO RELEASE O T H E R K I N D S O F CONSIDERATION IN THE TRANSACTION , W A S REALLY BECAUSE OF THE FACT THAT T H E R E W A S THIS N O T I C E OF LIEN HANGING O U T THERE. I T W A S REALLY TO MAKE SURE THAT T H E SPECIAL MASTER OR WHOEVER THE NEUTRAL WAS THAT WAS HOLDING ON TO THE PROPERTY W A S - - HOLD ON TO IT ESSENTIALLY IN TRUST TO MAKE SURE THAT T H E P R O C E E D S WERE DISTRIBUTED ACCORDINGLY AND THAT FACEBOOK WOULD NO L O N G E R HAVE TO DEAL WITH A N Y ISSUES ASSOCIATED WITH THIS NOTICE O F LIEN . I THINK YOUR HONOR IS CORRECT, WE DON 'T KNOW ANY OF T H E P A R T I C U L A R S O F I T S O W E D O N' T WANT TO HAVE AN UNKNOWN C L A I M AGAINST A COMPANY THAT WE BELIEVE WE NOW O W N HANGING O U T T H E R E AGAINST IT . AND THEY FILED A NOTICE. PROTECT OUR INTEREST . WE HAVE TO

BUT R E A L L Y T H E ESCROW

PROPOSAL THAT BOTH PARTIES MADE AT LEAST FROM O U R PERSPECTIVE W A S T O DEAL WITH THAT I S S U E. I F YOUR HONOR WERE TO RULE THAT FACEBOOK /CONNECTU , ONCE IT 'S IN THE HANDS OF 32

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FACEBOOK A N D T H E OTHER INDIVIDUALS WHO A R E O N O U R SIDE OF THE CASE WHO HAVE SETTLED O U T, D O N'T R E A L L Y HAVE ANY RESPONSIBILITIES AS TO THE N O T I C E O F LIEN THAT HAS BEEN FILED, THAT ACTUALLY MAKES THE JUDGMENT CONSIDERABLY SIMPLER . A N D, A N D I T'S -- FROM OUR PERSPECTIVE AT THAT POINT IT' S JUST A TIMING QUESTION A N D W E BELIEVE THAT, THAT THEY S H O U L D JUST BE ORDERED TO HAND US ALL OF T H E S T O C K T O T H E COMPANY W I T H I N 30 DAYS OF ENTRY OF JUDGMENT. ESCROW A G E N T A T A L L. T H E R E I S KIND OF A LINGERING T I M I N G ISSUE , EVEN WERE A SPECIAL MASTER T O B E APPOINTED. IF A SPECIAL M A S T E R WERE T O B E APPOINTED, WE DO HAVE TO ANSWER T H E Q U E S T I O N O F W H O IS GOING TO CONTINUE TO MAINTAIN T H E C O N N E C T U B U S I N E S S FROM T H E TIME OF ENTRY OF JUDGMENT UNTIL WHATEVER TIME T H O S E PROCEEDS ARE DISTRIBUTED. C O N N E C T U DOES HAVE A B U S I N E S S A N D IT HAS A WEB SITE AND IT H A S OPERATING EXPENSES. I D O N'T W E D O N' T NEED AN

BELIEVE IT HAS EMPLOYEES, BUT IT CERTAINLY H A S P E O P L E D O I N G WORK ON I T S B E H A L F. O N E OF THE T H I N G S W E WERE TALKING ABOUT AS WE WERE TRYING TO WORK UP THE JUDGMENT ON O U R SIDE OF THE CASE IS THAT I F W E D O N' T G E T THE 33

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COMPANY WITHIN A VERY S H O R T TIME P E R I O D A N D WE HOLD ON -- OR A SPECIAL M A S T E R OR SOMEONE WERE TO HOLD ON TO IT THROUGH THE FINAL P I E C E S O F T H E APPEALS O R T H E F I N A L C O U R T A N D HOW IS THAT PIECE GOING TO BE MANAGED? PERHAPS THE SPECIAL MASTER I S GOING T O D O IT . HOW IS THAT GOING TO BE FUNDED ? AND THAT' S A

DIFFICULT QUESTION I N O U R VIEW. A N D OUR PREFERENCE IS TO HONOR THE SETTL EMENT AGREEMENT AND W E GET CONTROL O F THE COMPANY THROUGH O W N I N G THE S H A R E S A N D WE WILL CONTINUE TO OPERATE IT AND T H E REST OF T H E A S S E T S OF T H E COMPANY AS IS NECESSARY. T H E ISSUE OF COST F O R THE SPECIAL MASTER IS AN IMPORTANT I S S U E FROM O U R P E R S P E C T I V E BECAUSE , AGAIN , FROM OUR PERSPECTIVE THE ONLY REASON THAT A SPECIAL MASTER OR A COURT APPOINTED P E R S O N W O U L D HAVE THIS KIND OF A ROLE W O U L D R E A L L Y BE BECAUSE O F A DISPUTE BETWEEN QUINN EMANUEL AND T H E C O N N E C T U FOUNDERS . W E R E A L L Y AREN'T INVOLVED IN THAT, A N D W E D O N'T THINK WE S H O U L D HAVE TO P A Y F O R A F I G H T BETWEEN THOSE PARTIES. T H E COURT: THE ONLY REASON. WELL , I D O N'T AGREE THAT' S

T H E REASON THAT I 'M CONTEMPLATING 34

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IS THAT YOU A L L WERE U N A B L E T O D O I T O N YOUR O W N A N D Y O U CAME T O T H E COURT AND ASKED ME TO ENFORCE IT A N D I N T H E ENFORCING OF IT , I T R E Q U I R E S S T E P S. A N D IT' S N O T A M A T T E R THAT I C A N D O WITHOUT PUTTING SOMEONE IN T H E M I D D L E TO COLLECT T H I N G S I N O R D E R T O MAKE SURE EVERYTHING I S, IS, IS -- GOES ACCORDING TO T H E AGREEMENT. S O THAT 'S WHY I' M CONTEMPLATING REQUIRES T H E M A S T E R IN THE FIRST PLACE A N D ALSO REQUIRING THAT THE PARTIES SHARE THE COST OF THAT. I D O N'T CONTEMPLATE THAT IT WOULD BE A LONG DRAWN OUT A F F A I R, ALTHOUGH THINGS C A N OVER TAKE T H E TIMING THAT I ACTUALLY D O N'T CONTEMPLATE HERE, N O R D O I CONTEMPLATE THAT THE COST OF SOMEONE T O D O THIS WOULD BE PROHIBITED. M R. CHATTERJEE: THANK Y O U, YOUR H O N O R.

T H E ONLY C A V E A T T O THAT POINT IS IF QUINN EMANUEL IS GOING TO SEEK TO INTERVENE IN THAT TRANSACTION A N D PROLONG T H E SPECIAL M A S T E R'S ROLE AND INCREASE T H E EXPENSE , W E T H I N K THEY S H O U L D HAVE TO PARTICIPATE IN T H E COST OF IT . T H E COURT: M R. BARRETT: WELL , THAT 'S A FAIR POINT . YOUR HONOR, IF I COULD DAVID BARRETT

SPEAK TO A COUPLE OF THOSE P O I N T S. FOR FACEBOOK.

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M R. UNDERHILL : M R. BARRETT: FOR CONNECTU.

NO, F O R C O N N E C T U. I' M S O R R Y. DAVID BARRETT

W E CERTAINLY WOULD BE SUPPORTIVE O F T H E IDEA OF AN ESCROW AGENT APPOINTED B Y T H E COURT. O N E ASPECT OF T H E P R O P O S E D JUDGMENTS ON WHICH T H E PARTIES A R E I N AGREEMENT, YOUR HONOR, IS THAT BOTH O F T H E FORMS OF JUDGMENT THAT T H E PARTIES SUBMITTED T O T H E COURT INDICATED THAT THE CLOSING, IF Y O U WILL -- I' M PUTTING TO O N E SIDE T H E Q U I N N EMANUEL ISSUE FOR T H E M O M E N T -- BUT JUST THE DEPOSIT OF THE S H A R E S O F S T O C K WITH T H E RESPECTIVE COMPANIES A N D THE CASH WOULD OCCUR EITHER AFTER CONNECTU IRREVOCABLY W A I V E D I T S RIGHT TO APPEAL T H E JUDGMENT OR W I T H I N FIVE DAYS AFTER ANY APPEALS THAT A R E T A K E N BECOME FINAL. T H E COURT: THE PROPOSALS. I T CREATED FOR M E A PROBLEM BECAUSE THERE C A N - - A N A R G U M E N T C A N BE MADE THAT A JUDGMENT IS NOT APPEALABLE UNTIL THE FINAL ACT REQUIRED UNDER THE JUDGMENT TAKES PLACE WHICH MAKES I T A CIRCUITOUS SITUATION BECAUSE JUST M Y MAKING A JUDGMENT IF I SET UP A SITUATION THAT HAS TO TAKE PLACE A N D P E O P L E SAY I DON 'T REALLY HAVE TO APPEAL 36 I S A W THAT IN AT LEAST O N E O F

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THAT UNTIL I'M REQUIRED TO TAKE THAT A C T, WHICH MEANS THAT IT NEVER COMES, PERHAPS. M R. BARRETT: I THINK THERE ARE PROBABLY ONE IS THAT THIS

TWO WAYS OUT O F THAT , YOUR HONOR .

IS T H E F U N C T I O NAL EQUIVALENT OF A STAY . T H E OTHER IS THAT T H E COURT' S P R O P O S E D SOLUTION , W H I C H A S I N O W UNDERSTAND WHAT YOU 'RE S A Y I N G I S, WHICH IS THAT T H E, THAT THE CONSIDERATION WOULD GO INTO T H E CONTROL O F T H E SPECIAL MASTER WITHIN SOME RELATIVELY BRIEF PERIOD OF TIME AND THEN, Y O U KNOW , WHAT WE 'RE CONCERNED ABOUT , YOUR HONOR , AND BOTH SIDES ARE PROBABLY CONCERNED A B O U T, IS THAT EACH SIDE IS GIVEN CONSIDERATION HERE. T H E R E I S A POSSIBILITY THAT THE JUDGMENT WOULD BE REVERSED ON A P P E A L A N D IF YOU HAVE DONE THINGS LIKE GET RELEASES, DISMISSED CASES NOT JUST IN THIS CASE B U T IN THE MASSACHUSETTS COURT, HAND OVER THE COMPANY AND HAND OVER CASH F O R THAT M A T T E R, UNSCRAMBLING THAT IN THE EVENT OF A REVERSAL COULD B E C O M E, YOU KNOW, MUCH MORE COMPLICATED THAN JUST SITTING THERE AND MAINTAINING T H E S T A T U S QUO , A L T H O U G H I THINK I WOULD LIKE T O CONSULT WITH M Y COLLEAGUES ON THIS, B U T I THINK IF T H E S T A T U S QUO IS MAINTAINED ESSENTIALLY BY A 37

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SPECIAL MASTER SITTING THERE WITH THE ASSETS DURING T H E A P P E A L PROCESS, AND WE C A N TALK ABOUT MANAGING OF T H E C O N N E C T U A S S E T, I D O N' T T H I N K THAT IS GOING TO BE A N Y S I G N I F I C A N T PROBLEM , YOUR HONOR . I THINK IT C A N - - W E A R E HAPPY TO HE -A N D M R. UNDERHILL C A N DISCUSS THIS FURTHER I F Y O U WOULD LIKE -- WE' RE HAPPY TO MAINTAIN AND CONTINUE TO R U N THAT BUSINESS ESSENTIALLY T H E W A Y THAT I T H A S BEEN R U N A N D NOT TO DO ANYTHING AS YOUR HONOR INDICATED THAT WOULD MATERIALLY AFFECT IT IN A NEGATIVE W A Y O R TAKE ON OBLIGATIONS THAT WOULD BE INAPPROPRIATE AND WE C A N KEEP , Y O U KNOW, FACEBOOK INFORMED ABOUT THAT. I D O N'T THINK THAT THAT S H O U L D BE A PROBLEM. A N D WE' RE ALSO H A P P Y T O P U R S U E THE

APPELLATE PROCESS AS EXPEDITIOUSLY AS THE NINTH CIRCUIT WOULD ALLOW US. THERE ARE ALSO A COUPLE O F OTHER ITEMS THAT YOUR HONOR RAISED. I D O N'T KNOW IF YOU WANT

TO TALK ABOUT THOSE AT THIS P O I N T. T H E COURT: M Y FOCUS I S O N THE FORM O F IF YOU WANT TO

T H E J U D G M E N T A S I OUTLINED IT . ADDRESS THOSE MATTERS FURTHER .

I T DOES SEEM TO ME THAT T H E R E I S G O I N G T O BE -- T H E R E A S O N I'M P U T I N THIS POSITION IS THAT 38

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THERE WILL BE THE NECESSITY O F T H E COURT TAKING FURTHER ACTION TO ENFORCE THE JUDGMENT ONCE THE JUDGMENT IS IN PLACE THAT I C A N' T C O N T E M P L A T E T H E - - T H O S E O R D E R S AT THIS P O I N T. A N D IT COULD BE THAT I 'LL HAVE TO AMEND T H E J U D G M E N T A N D DO OTHER THINGS TO TAKE THOSE ADDITION AL STEPS. S O M Y F O C U S I S O N SHOW ME W H Y I SHOULDN' T ENTER T H E J U D G M E N T A S I OUTLINED JUST TO GET THIS PROCESS STARTED? M Y GOAL WOULD BE TO P U T I N P L A C E A JUDGMENT WHICH WOULD ENFORCE THE SETTLEMENT AGREEMENT A N D IF THERE ARE APPEALS OR CHALLENGES T O IT THAT DEAL WITH THAT AS A C I V I L PROCEDURE MATTER IN T H E O R D I N A R Y C O U R S E OF EVENTS , I F THAT S H O U L D COME. B U T IF THERE IS SOMETHING ELSE ON THE FORM THE JUDGMENT , S P E A K N O W. M R. BARRETT: Y E S, YOUR H O N O R. YOU

R A I S E D T H E QUESTION ABOUT THE L E G E N D O N T H E -- THE FACEBOOK S H A R E S THAT WILL BE PROVIDED AS PART O F T H E J U D G M E N T A N D THE L E G E N D, THE FORM OF LEGEND THAT IS ATTACHED TO EACH SIDE PROPOSED JUDGMENT IS IDENTICAL, EXCEPT IN O N E RESPECT B U T I T I S A SIGNIFICANT RESPECT. 39

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A N D THOSE LEGENDS A P P E A R IN EXHIBIT B OF DEFENDANT'S PROPOSED JUDGMENT A N D I N EXHIBIT 3 OF FACEBOOK 'S PROPOSED JUDGMENT. A N D, A N D T H E -- WHAT

I' M REFERRING TO IS THAT O U R PROPOSED JUDGMENT HAS IT IN A PART O F T H E LEGEND T H E STATEMENT THAT T H E HOLDERS OF SUCH S H A R E S ARE ENTITLED TO T H E SAME ANTI- DILUTION RIGHTS AFFORDED TO T H E ISSUERS S E R I E S D PREFERRED STOCK AS PROVIDED IN T H E TERM SHEET A N D SETTLEMENT AGREEMENT . F O R REASONS - - I 'M NOT SURE, MAYBE IT W A S N O T I N T E N T I O N A L, THE L E G E N D THAT FACEBOOK PROPOSES OMITS THAT SENTENCE ENTIRELY. AND CONSISTENT WITH EXACTLY WHAT YOUR HONOR SAID THAT THIS , THAT THIS SETTLE -- THAT THIS JUDGMENT IS GOING TO ENFORCE PRECISELY T H E T E R M S THAT THE PARTIES AGREED TO ON T H E TERM SHEET , W E BELIEVE THAT THAT LANGUAGE SHOULD B E I N T H E R E. IT 'S RIGHT ON THE S E C O N D PAGE . I BELIEVE OURS I S ALMOST VERBATIM FROM T H E SECOND PAGE O F T H E HANDWRITTEN TERM S H E E T. Y O U KNOW, FIRST IT SAYS THAT T H E S H A R E S SHALL BE VOTED IN ACCORDANCE WITH T H E BOARD OF DIRECTORS RECOMMENDATIONS. VERSIONS . B U T FOR SOME REASON T H E F A C E B O O K VERSION 40 THAT 'S IN BOTH

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DROPS THE SECOND PART O F THAT SAME SENTENCE WHICH SAYS, "SUBJECT TO T H E SAME ANTI- DILUTION PROTECTIONS AWARDED TO SERIES D PREFERRED STOCK ." S O W E T H I N K THAT THAT NEEDS TO BE IN THERE AND I T SHOULD ALSO B E CLEAR I THINK , YOUR HONOR , B U T I JUST WANT TO MAKE SURE THAT THE R E C O R D REFLECTS THIS, THAT THOSE RESTRICTIONS THAT WERE S E T F O R T H I N T H E TERM S H E E T A R E THE ONLY RESTRICTIONS O F A N Y KIND O T H E R THAN THOSE THAT, THAT FLOW FROM THE FACT THAT THIS I S A PRIVATE COMPANY, A N D, THEREFORE , T H E SECURITIES A R E UNREGISTERED. T H O S E A R E THE ONLY RESTRICTIONS THAT S H O U L D A T T A C H TO THIS S T O C K. A S YOUR HONOR M A Y R E C A L L, THERE IN T H E NEGOTIATIONS THAT T H E PARTIES H A D SUBSEQUENT TO T H E SIGNING OF THE TERM SHEET THERE WERE D I S C U S S I O N S O F OTHER POSSIBLE RESTRICTIONS SUCH AS T H E R I G H T O F FIRST OFFER A N D A LOCK UP AND THOSE A R E N O T RESTRICTED IN THE TERM SHEET. A N D AS YOUR H O N O R SAID VERY CLEARLY A T PAGE 60 OF THE TRANSCRIPT FROM LAST M O N D A Y, "THIS IS , THIS IS C O M M O N S T O C K. IT DOESN 'T SAY ANYTHING IT OUGHT

ABOUT IT BEING LETTERED STOCK IN A N Y W A Y. TO BE F R E E L Y T R A D E D. "

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AND I BELIEVE THAT THAT I S ACCOMPLISHED BY THIS LANGUAGE THAT W E HAVE HERE AND -- B U T I JUST WANT T O B E C L E A R A N D THAT T H E COURT IS CLEAR THAT THOSE RESTRICTIONS OR STIPULATIONS THAT WE HAVE OUTLINED TO GO ON THE STOCK A R E T H E ONLY ONES . L E T ME SEE IF THERE A R E A N Y OTHERS . T H E COURT: W H I L E Y O U' RE DOING THAT, LET

ME JUST CHECK, IS THERE A N Y OBJECTION TO INCLUDING T H E A D D I T I O NAL LANGUAGE IN T H E EXHIBIT B SUBMITTED BY CONNECTU ? M R. CHATTERJEE: YOUR HONOR, T H E ONLY

POINT I' LL MAKE I S THAT I DON 'T THINK IT' S NECESSARY Y O U' RE ENFORCING T H E TERM SHEET A N D SETTLEMENT AGREEMENT . THERE . IT HAS T H E PROVISION IN

AND IT DOESN 'T SEEM LIKE IT 'S NECESSARY OR THAT WAS T H E ONLY

LEGALLY REQUIRED ON THE L E G E N D.

POINT THAT I W A S GOING TO MAKE, BUT I' LL DEFER TO T H E C O U R T'S JUDGMENT ON WHICH L E G E N D I S APPROPRIATE . T H E COURT: VERY WELL. I T I S A RIGHT

THAT SEEMS TO BE INHERENT IN THE STOCK A N D T H E CERTIFICATE I T S E L F BEARING IT , S I N C E I PRESUME THESE A R E NEGOTIABLE , BEARING IT WOULD CARRY THOSE RIGHTS. SO I WOULD ADD IT . D I D YOU COME UP WITH O T H E R MATTERS ? 42

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M R. BARRETT:

UM , U M - - YOUR HONOR , I

JUST THINK ONE OTHER SIGNIFICANT O N E W H I C H I S YOUR HONOR INDICATED THAT O N E O F T H E DOCUMENTS THAT THE SPECIAL MASTER WOULD COLLECT WOULD BE RELEASES. O U R, O U R - - I THINK THAT WE CAN SIMPLIFY THIS AND I DON 'T REALLY THINK THAT THAT I S NECESSARY O R EVEN NECESSARILY CONSISTENT WITH BOTH WHAT MR. CHATTERJEE REPRESENTED TO THE COURT LAST M O N D A Y A N D REALLY T H E S P I R I T AS I UNDERSTAND IT OF T H E C O U R T'S ORDER F O R T H E FOLLOWING REASON: WHAT MR . CHATTERJEE TOLD THE COURT A N D WHAT HE WAS A S K I N G A N D WHAT I THINK T H E C O U R T D I D AT PAGE 12 OF THE TRANSCRIPT TO ENTER A J U D G M E N T TELLING THE PARTIES TO COMPLY WITH THE TERM SHEET A N D SETTLEMENT AGREEMENT A N D ESSENTIALLY STAPLE IT ONTO THE JUDGMENT . A N D I T H I N K WHAT WE WERE TRYING TO DO IN O U R P R O P O S E D SETTLEMENT IS TO A D H E R E A S CLOSELY AS WE COULD TO THAT WHERE IT WAS POSSIBLE . N O W, IT 'S OBVIOUSLY N O T P O S S I B L E. YOU

HAVE TO GET A RULE 4 1 DISMISS AL AND FILE IT IN COURT WITH RESPECT T O T H E LEGEND ON T H E S T O C K. IT 'S NECESSARY TO DO THAT BECAUSE Y O U' RE ACTUALLY CREATING AN INSTRUMENT THAT I S, AS THE COURT SAID, A NEGOTIABLE INSTRUMENT THAT IS PART O F T H E 43

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CONSIDERATION.

S O I T'S NECESSARY T O DEFINE WHAT

THAT INSTRUMENT SAID . B U T BEYOND THAT, A N D PARTICULARLY WITH RESPECT TO THE RELEASE, I DON 'T REALLY THINK THAT IT 'S NECESSARY OR CONSISTENT WITH, AGAIN, T H E IDEA THAT THE COURT EXPRESSED A T PAGE 60 THAT YOU C A N ENFORCE THIS AGREEMENT AND NOTHING MORE. WITH RESPECT TO THE RELEASES , YOUR HONOR , THAT' S A N I S S U E O N W H I C H T H E PARTIES HAVE GONE BACK A N D F O R T H. THEY WENT BACK A N D F O R T H F O R TWO M O N T H S WE HAVE GONE BACK AND FORTH

AFTER THE TERM SHEET .

IN T H E LAST C O U P L E O F DAYS . W E HAVE GOTTEN CLOSER, B U T W E S T I L L D O N' T HAVE AN AGREEMENT ON IT . A N D IT SEEMS TO ME THAT, THAT WHAT Y O U HAVE REALLY G O T HERE IS Y O U HAVE G O T A RELEASE IN PARAGRAPH 2 . I T SAYS ALL PARTIES GET MUTUAL RELEASES AS BROAD AS POSSIBLE . NEGOTIATED. LANGUAGE . I F O N E OF US EVER SUES T H E O T H E R O N E WITH RESPECT TO A RELEASE CLAIM , T H E PARTY THAT H A S BEEN SUED, IF THEY THI NK IT' S A GOOD DEFENSE, CAN GO INTO THAT C O U R T A T THAT TIME AND S A Y - 44 THAT'S WHAT THE PARTIES I T I S MEANINGFUL

THAT 'S IN THERE.

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T H E COURT:

WELL , L E T ME -- I HEAR YOUR

ARGUMENT A N D I D O N'T A C C E P T I T, BUT I DO PROPOSE THAT IN THE FORM OF THE JUDGMENT , BECAUSE I WILL MAKE A J U D G M E N T A B O U T THAT , Y O U WILL B E ABLE TO MAKE THIS ARGUMENT A T A LATER TIME. I N O T H E R W O R D S, WHAT I HEAR YOU S A Y I N G I S THAT THE PARTIES, I SHOULD N O T REQUIRE A SIGNED RELEASE BECAUSE T H E SETTLEMENT AGREEMENT IS A S I G N E D RELEASE A N D I S H O U L D INTERPRET THE WORD GET RELEASED AS A R E RELEASE D. ARGUMENT . A N D I 'LL L I S T E N T O THAT

IT' S JUST AT THIS POINT MY JUDGMENT WILL

REQUIRE THAT T H E RELEASE B E SUBMITTED AS APPROVED OF T H E C O U R T. I F I D E C I D E THAT T H E AGREEMENT IS SUFFICIENT, A N D I 'LL ORDER THAT TO BE DEPOSITED A N D THAT WILL B E SUFFICIENT . PART OF WHAT I ANTICIPATE IS AN ARGUMENT BY O N E O R BOTH PARTIES THAT SUBSEQUENT LITIGATION VIOLATES WHAT WAS BEING RELEASED , A N D I WANT TO , I N TRUE TO THE ROLE THAT Y O U HAVE G I V E N M E T O ENFORCE T H E AGREEMENT, IS TO ENFORCE THE RELEASE. A N D PART O F THAT WILL BE TO UNDERSTAND WHAT WAS RELEASED A N D THAT IS B E T T E R DONE LATER ON . S O L E T ME RESPOND T O YOUR ARGUMENT IN THAT WAY A N D A S K YOU IF THERE A R E O T H E R P A R T S O F I T 45

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THAT YOU WANT TO SPEAK TO. M R. BARRETT: A N D A G A I N, YOUR H O N O R, I

THINK A LITTLE BIT O F THE CONFUSION HERE DOES ARISE FROM THE T I M I N G I S S U E. F O R EXAMPLE, IF THE RELEASE BECAME EFFECTIVE, LET 'S SAY AFTER A L L APPEALS HAVE BEEN EXHAUSTED, THEN I T MAKES SENSE T O RELEASE , FOR EXAMPLE, OUR FRAUD DEFENSE , O R OUR FRAUD CLAIM BASED ON WHAT HAPPENED IN THE MEDIATION. I D O N'T THINK IT MAKES SENSE , A N D I D O N' T THINK T H E C O U R T W O U L D REQUIRE US TO RELEASE THAT CLAIM N O W. M A Y B E I 'M MISTAKEN ABOUT THAT. IN OTHER

WORDS , W E SHOULDN 'T HAVE T O FACE AN ARGUMENT OR AT LEAST ANYMORE, AN ARGUMENT THAN WE ALREADY HAVE TO FACE THAT, THAT B Y SIGNING THIS DOCUMENT WE DIDN'T RELEASE A CLAIM THAT THE TERM SHEET ITSELF WAS PROCURED BY FRAUD IN T H E INDUCEMENT . T H E COURT: WELL , I D O N'T KNOW THE A N S W E R

TO THAT, B U T I DO KNOW THAT THAT IS A LEGITIMATE QUESTION TO A S K WITH RESPECT TO WHAT I TAKE AS THE SUBMISSION. I T S E E M S T O M E THAT MY JUDGMENT THAT I'M INTENDING T O E N T E R R U L E S AGAINST SOME OF THAT CLAIM . 46

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M R. BARRETT: T H E COURT:

UH -H U H. W H I C H I S W H Y YOU C A N A P P E A L

M R. BARRETT: T H E COURT: ABILITY TO BRING IT.

TRUE. A S OPPOSED TO YOUR LATER

B U T I D O N' T WANT TO DO THAT AT THIS P O I N T BECAUSE I HAVE N O T P U T MYSELF IN A POSITION WHERE I KNOW ENOUGH TO MAKE A J U D G M E N T A B O U T THAT . M R. BARRETT: A N D, YOUR H O N O R, ANOTHER OBVIOUSLY I THINK EVEN

QUESTION ABOUT THE TIMING.

MR . CHATTERJEE A N D I C A N P R O B A B L Y A G R E E O N T H E TERMS OF WHAT RULE 4 1 DISMISSAL FOR T H E C A S E S W O U L D LOOK LIKE A N D INDEED IT SETS FORTH HERE, "DISMISS WITH PREJUDICE . EACH SIDE TO BEAR THEIR OWN COSTS

A N D ATTORNEYS' FEES. " T H E COURT: THE PARTIES ARE FREE T O

STIPULATE, AFTER I E N T E R M Y J U D G M E N T T O T H E -- THAT THEY HAVE DONE WHATEVER THEY WANT, BUT I' M N O T GOING TO RELY UPON THAT PROPOSED STIPULATION BECAUSE IT' S A PROPOSED STIPULATION THAT I H A V E N'T SEEN THE PARTIES PUT TOGETHER JUST YET . M R. BARRETT: SURE. YOUR HONOR , M Y - -

I' M S O R R Y - - M Y Q U E S T I O N I S N O T ABOUT THE TERMS OF IT BECAUSE I T H I N K O N THAT WE 'RE PROBABLY BOTH 47

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PRETTY C L E A R. M Y Q U E S T I O N I S, AGAIN, P U R E L Y O N E OF PROCEDURE AND TIMING . I THINK IT WOULD BE BOTH DIFFICULT A N D PROBABLY INCONVENIENT F O R THE C O U R T S T O, TO -- FOR US TO FILE A S T I P U L A T I O N O F DISMISS AL, F O R EXAMPLE , WHILE THIS JUDGMENT IS UNDER APPEAL . I T W O U L D MAKE A LOT MORE SENSE TO WAIT UNTIL . T H E COURT: FILED . I D O N'T I N T E N D T O HAVE IT

MY FOCUS IS THAT I T H A S TO BE DEPOSITED . M R. BARRETT: T H E COURT: SURE. OKAY . THAT'S --

I 'LL JUDGE WHEN IT -- MY

PROPOSED JUDGMENT WOULD S A Y THAT IT 'S UP TO THE COURT TO S A Y T O T H E MASTER "N O W, SEND THESE THINGS FORWARD. " M R. BARRETT: T H E COURT: YOUR POINT. M R. BARRETT: YEAH. S O, YOU KNOW, AGAIN , UH -H U H. A N D, A N D - - B U T I UNDERSTAND

IN THAT REGARD , YOUR HONOR , W E, WE BELIEVE, AND I BELIEVE AGAIN THAT T H E PARTIES A R E IN AGREEMENT THAT THAT SENDING FORTH , A S YOUR HONOR DESCRIBED IT , S H O U L D AWAIT. THAT CAN COME IMMEDIATELY AFTER

THE FINALITY O F ANY APPEALS PROCESS . 48

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THING .

T H E COURT:

WELL , EVEN THAT IS SOMETHING I

THAT I'M N O T ADDRESSING IN MY JUDGMENT .

APPRECIATE YOUR HELPFUL SUGGESTION THAT MAYBE THE W A Y A R O U N D THIS I S T O E N T E R T H E JUDGMENT AND STAY AN EXECUTION O F I T U N T I L SOME APPROPRIATE TIME. M Y PROPOSED LANGUAGE I S THAT THE COURT WILL APPOINT A SPECIAL MASTER TO A C C E P T A N D MAINTAIN THE DEPOSITS MANDATED B Y THIS JUDGMENT AND TO TAKE ACTIONS WITH T H E D E P O S I T S A S T H E COURT FROM TIME TO TIME WILL ORDER . I N O T H E R W O R D S, I JUST WANT TO PUT IT SOMEPLACE S O I CAN MAKE SURE THAT EVERYTHING THAT IS NECESSARY T O EXECUTE T H E AGREEMENT IS IN ONE PLACE A N D THEN TO HAVE, FROM THERE, SUBJECT ONLY T O T H E O R D E R O F T H E COURT, T H E ABILITY TO A F F E C T T H E EXECUTION S O THAT I DON 'T HAVE T O G O A N Y PLACE TO GET I T DONE . THAT WAS M Y GOAL . M R. BARRETT: RIGHT . A N D - - G O A H E A D. ONE OTHER

M R. CHATTERJEE: M R. BARRETT:

I' M S O R R Y.

IN THE PLAINTIFF'S PROPOSED FORM OF

JUDGMENT THERE IS ALSO A PARAGRAPH THAT SAYS THAT THEY MAY FILE A M O T I O N FOR ATTORNEYS FEES OR BILL OF COST. 49

U.S. COURT REPORTERS

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T H E COURT: M R. BARRETT:

I HAVE NOT INCLUDED THAT. THANK Y O U. YOUR HONOR, AS TO T H E

M R. CHATTERJEE:

PERFORMANCE I S S U E S, THERE ARE A COUPLE OF DETAILS THAT I THINK ARE IMPORTANT . O N E, ON T H E I S S U E O F T I M I N G, WE WOULD AGREE WITH YOUR H O N O R THAT THERE IS AN ISSUE A N D I T OCCURRED TO US AFTER WE SUBMITTED THIS . AND I TOLD

MR . BARRETT THAT IT WAS AN ISSUE F O R U S YESTERDAY ABOUT WAITING UNTIL THE JUDGMENT IS FINAL A N D N O T APPEALABLE. W E T H I N K THAT IT S H O U L D H A P P E N QUICKLY. N O W, PERHAPS THAT'S SOMETHING BETTER LEFT F O R T H E SPECIAL M A S T E R TO DECIDE ON T H E T I M I N G TO R E P O R T T O T H E COURT ON WHAT T O D O. B U T IF THEY WANT TO STAY EXECUTION OF T H E PROCEEDINGS , W E THINK TYPICALLY WHEN THEY TRY AND FILE A STAY OF EXECUTION O F A JUDGMENT , THEY NEED TO FILE A BOND SO WE C A N MAKE SURE THAT T H E ASSETS THAT WE' RE PURCHASING A R E PROTECTED . THAT 'S A COLLATERAL ISSUE . T H E COURT: THAT 'S WHY I THINK THE RULES

OF CIVIL PROCEDURE WILL TAKE CARE O F A N Y POST- JUDGMENT PROBLEM. M R. CHATTERJEE: T H E SECOND ISSUE, YOUR 50

U.S. COURT REPORTERS

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HONOR , I S A S T O THE STOCK SHARES .

THE , T H E -- ONE

OF T H E I S S U E S, A N D PERHAPS THIS IS SOMETHING THAT T H E SPECIAL M A S T E R C A N WORK O U T, IS AS LONG AS WE HAVE THE LIEN ISSUE UNRESOLVED A N D HANGING O U T THERE , R I G H T N O W WE DON 'T KNOW W H O TO WRITE THE STOCK CERTIFICATES T O. D O W E LIST THE THREE - - O R I GUESS THE FOUR SHAREHOLDERS IN CONNECTU CURRENTLY O R D O W E INCLUDE QUINN EMANUEL O N THE SHARES ? W E WILL NEED SOME G U I D A N C E A S T O H O W TO DO THAT. T H E COURT: MASTER C A N WORK O U T. M R. CHATTERJEE: HONOR . T H E COURT: Y E S. IF I MAY , B R U C E V A N OKAY. T H A N K Y O U, YOUR THAT 'S A DETAIL THAT T H E

M R. VAN D A L S E M:

D A L S E M O N B E H A L F OF QUINN EMANUEL. T H E R E A R E A C O U P L E OF POINTS THAT I W O U L D LIKE TO RAISE WITH RESPECT TO T H E C O U R T'S JUDGMENT . BOTH PROPOSED FORMS OF JUDGMENT FROM THE PLAINTIFF A N D THE DEFENDANT H A D MADE A PROVISION, A L B E I T I N DIFFERENT WAYS, TO SECURE T H E LIEN A N D THEY PROPOSED -- CON NECTU PROPOSED BASICALLY ESCROWING T H E MAXIMUM A M O U N T OF THE F E E C L A I M A N D 51

U.S. COURT REPORTERS

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FACEBOOK PROPOSED ESCROWING A L L OF IT. THIS IS AN UNUSUAL CASE I N T H E CONTEXT O F A LIEN BECAUSE WHAT WOULD NORMALLY HAPPEN IN A SITUATION WHERE A N ATTORNEY FILES A NOTICE O F LIEN IS THAT WHEN T H E DEFENDANT , A S S U M E AN ALL CASH DEAL, WHEN A DEFENDANT GOES T O W R I T E A CHECK , THEY INCLUDE THE LIEN CLAIMANT' S NAME ON THAT CHECK AND T H E PARTIES E I T H E R WORK IT O U T O R I T GETS ESCROWED UNTIL T H E M A T T E R IS LITIGATED OR T H E PARTIES REACH