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KINESOFT DEVELOPMENT CORP. v. SOFTBANK HOLDINGS
February 16, 2001
KINESOFT DEVELOPMENT CORPORATION, PLAINTIFF,
SOFTBANK HOLDINGS INC. AND RONALD D. FISHER, DEFENDANTS.
The opinion of the court was delivered by: Schenkier, United States Magistrate Judge.
MEMORANDUM OPINION AND ORDER
This is the Court's second summary judgment opinion in this
case, which arises out of disputes between plaintiff, Kinesoft
Development Corporation ("Kinesoft"), and defendant Softbank
Holdings Inc. ("Softbank"), concerning the performance of the
terms of a 1995 Shareholders Agreement ("the Shareholders
Agreement") and a 1997 Settlement Agreement ("the 1997
Agreement"). In its second amended complaint, Kinesoft alleges
breach of the Shareholders Agreement (Count I) and the 1997
Agreement (Count II) by Softbank; breach of fiduciary duty by
Softbank (Count IV) and Ronald D. Fisher, the Vice Chairman of
Softbank (Count V); and tortious interference with prospective
economic advantage by Softbank (Count III). The Court has
jurisdiction over this matter pursuant to 28 U.S.C. § 1332, and
venue is proper in this Court under 28 U.S.C. § 1391.*fn1
In its earlier opinion ("Kinesoft I"), the Court granted
Kinesoft's motion for summary judgment on Softbank's
counterclaim. In this opinion, the Court addresses the motion for
summary judgment filed by the defendants (doc. # 47), which seeks
a judgment disposing of all five counts of the second amended
complaint. For the reasons that follow, defendants' motion is
granted in part and denied in part.*fn2
Summary judgment is proper if the record shows that there is no
genuine issue as to any material fact, and that the moving party
is entitled to judgment as a matter of law. See Lexington Ins.
Co. v. Rugg & Knopp, Inc., 165 F.3d 1087, 1090 (7th Cir. 1999).
A genuine issue for trial exists only when the "evidence is such
that a reasonable jury could return a verdict for the nonmoving
party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106
S.Ct. 2505, 91 L.Ed.2d 202 (1986). If the evidence is merely
colorable or is not significantly probative, summary judgment may
be granted. See Liberty Lobby, 477 U.S. at 249-50, 106 S.Ct.
2505; Flip Side Prods., Inc. v. Jam Prods. Ltd., 843 F.2d 1024,
1032 (7th Cir. 1988).
Softbank has complied with Local Rule 56.1(a), which requires a
party moving for summary judgment to file a statement of material
facts as to which the moving party contends there is no genuine
issue. As required, Softbank's statement of material, undisputed
facts included "references to the affidavits, parts of the
record, and other supporting materials relied upon to support the
facts set forth in that paragraph." UNITED STATES DIST. COURT, N.
DIST. OF ILL. LR 56.1. All properly supported material facts set
forth in a summary judgment motion are deemed admitted unless
properly controverted by the opposing party. See id.; see also
Corder v. Lucent Techs., Inc., 162 F.3d 924, 927 (7th Cir.
1998); Flaherty v. Gas Research Inst., 31 F.3d 451, 453 (7th
Cir. 1994); Waldridge v. American Hoechst Corp., 24 F.3d 918,
921-22 (7th Cir. 1994)
Thus, once Softbank moved for summary judgment, and offered
evidentiary materials to support its factual allegations,
Kinesoft could not merely rely on its denials in the pleadings to
show that a genuine issue of material fact existed. See Shermer
v. Illinois Dep't of Transp., 171 F.3d 475, 477 (7th Cir. 1999)
(citing Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548,
91 L.Ed.2d 265 (1986)). Rather, Kinesoft's obligation is to "come
forward with appropriate evidence demonstrating that there [was]
a pending dispute of material fact." Waldridge, 24 F.3d at 921;
see also Vector-Springfield Properties, Ltd. v. Central Illinois
Light Co., Inc., 108 F.3d 806, 809 (7th Cir. 1997). To meet this
burden, Kinesoft must counter the evidence submitted by Softbank
with materials of "evidentiary quality" (e.g., depositions or
affidavits) that create a factual issue. Adler v. Glickman,
87 F.3d 956, 959 (7th Cir. 1996). While the evidence offered need
not be in a form that would be admissible at trial, see Liu v. T
& H Mach., Inc., 191 F.3d 790, 796 (7th Cir. 1999), the evidence
must identify a specific, genuine issue for trial. See Shermer,
171 F.3d at 477.
After careful review of the parties' Rule 56.1 statements, the
material facts are set forth below. As will be clear from the
discussion, while many of these facts are undisputed, many facts
material to certain of plaintiff's claims remain in genuine
A. The Shareholders Agreement.
In May 1995, in exchange for 41 percent of Kinesoft's common
stock, Softbank paid $12 million to Kinesoft and its two
principal shareholders: Peter Sills, Kinesoft's Chief Executive
Officer ("CEO"); and Peter
Mason, who at one time was Kinesoft's attorney and who also
served as a Kinesoft director from approximately May 25, 1995
until January 2000 (Defs.' Resp. Facts ¶ 5). The remaining 59
percent of Kinesoft's common stock was owned proportionately by
Mr. Sills, who currently owns 58.75 percent of the Kinesoft
common stock (Final Pretrial Order, § III(4)), and Mr. Mason, who
currently owns 25 percent of Kinesoft's common stock (Final
Pretrial Order, § III(8); Pl.'s Add'l Facts ¶ 68).
On May 25, 1995, Mr. Sills and his former partner, Mark Achler,
together with Kinesoft, Softbank and Softbank Corporation
(Softbank's parent), entered into the Shareholders Agreement
(Defs.' Facts ¶ 6).*fn4 The Shareholders Agreement requires
Kinesoft to have a Board of Directors, and provides for the
manner of their selection: "[e]ach Shareholder will vote or cause
to be voted all shares of Common Stock owned by it for the
election of nominees so designated as directors at any annual or
special meeting called for such purpose" (Shareholders Agreement
§ 2(a)). The Shareholders Agreement further provides that "any
corporate action" is to be taken by vote of the Board and
authorized by no less than a majority of the directors present at
any meeting at which a quorum is present or "by written consent
of all directors of the Company except as may be otherwise
required by paragraph (c) . . . or by law" (Id. at § 2(b)).
Section 2(c) of the Shareholders Agreement provides that certain
corporate action (e.g., any capital expenditure of $500,000 or
more) cannot be taken by Kinesoft unless all (rather than a
majority) of the directors present at a Board of Directors
meeting vote in favor of that action (Defs.' Ex. 4, at §
2(c)(iii)); (Defs.' Facts ¶ 6). The parties agree that the
Shareholders Agreement gives Softbank and Mr. Sills the right to
designate persons for election to the Kinesoft Board (Pl.'s Add'l
Facts ¶ 76; Defs.' Reply Facts ¶ 76).
The parties have identified five persons who served as members
of the Kinesoft Board of Directors at all times relevant to this
action. At those times, Mr. Fisher and Dr. T.A. Dolotta were
Softbank's designated Directors to the Kinesoft Board (Pl.'s
Add'l Facts ¶ 76). Messrs. Sills, Mason and Achler were
Kinesoft's designated Directors (Id.). None of these five
directors were elected at a formal board meeting (Id.; Defs.'
Reply Facts ¶ 76); rather, all five were placed on the Board by a
written, "formal unanimous consent of the Board of Directors"
(Pl.'s Resp. Facts ¶ 6; Defs.' Reply Facts ¶ 76; Final Pretrial
Order, § III(7)). When Kinesoft hired a new president and moved
the company from Chicago, Illinois to Austin, Texas, no formal
Board meeting was held to approve these acts: the communications
all were through e-mails and telephone calls (Pl.'s Add'l Facts ¶
Under the terms of the 1997 Agreement, Softbank was required to
make "Initial" and "Subsequent Advances" to Kinesoft totaling $10
million, as follows: (1) $5 million on June 12, 1997, the date
the 1997 Agreement was executed; (2) $2.5 million on April 1,
1998; and (3) $2.5 million on October 1, 1998 (Defs.' Facts ¶
10). Softbank made each of the Initial and Subsequent Advances on
the designated dates (Defs.' Facts ¶ 10).
The June 1997 Agreement also provides that, in certain
circumstances, Softbank "shall make available" to Kinesoft up to
$15 million in "Capital Advances" (Defs.' Ex. 9, at §
2.01(d)-(e)). Sections 2.01(d) and (e) of the 1997 Agreement
pertain to Capital Advances. Because those provisions are central
to this case we quote them in full:
(d) In addition to the Advances set forth in
paragraphs (a), (b) and (c) above, SOFTBANK shall
make available to Kinesoft an aggregate of FIFTEEN
MILLION DOLLARS ($15,000,000), which shall be
comprised of capital advances ("Capital
Advances") to be made by SOFTBANK to Kinesoft in
accordance with this subsection (d) and subsection
(e) below, from time to time and at Kinesoft's
request, for expenses and transactions not in the
ordinary course of business and pursuant to the
"Business Plan" (as defined below). SOFTBANK's
obligation to make Capital Advances is subject to
the satisfaction of the conditions set forth in
subsection (e) below and is separate from and in
addition to its obligations to make the Initial
Advance and the Subsequent Advances.
(e) Any request for Capital Advances by Kinesoft
shall be governed by the following:
(i) Capital Advances shall be for purposes
reasonably calculated to further Kinesoft's
pursuit of becoming a leader in the interactive
entertainment industry by, among other things,
(x) using its technology to engage in the
development of game and other interactive titles
on behalf of third-party creators and with
respect to its own titles, (y) licensing its
technologies and proprietary content to others,
and (z) publishing its technologies and
proprietary content for itself and others (the
"Business Plan"). Without limiting the
foregoing, the following capital transactions and
expenditures shall be deemed to be in furtherance
of the Business Plan:
(A) the acquisition of existing companies,
divisions, or operations with computer software
tools and other key technologies, products,
licenses, content, game or other interactive
titles, intellectual property or personnel;
(B) the acquisition (by license or otherwise) of
computer software tools and other key
technologies, products, content, game or other
interactive titles, and intellectual property;
(C) extraordinary costs associated with the
hiring of key individuals in connection with the
development of technologies, content and markets
for Kinesoft's products and services; or
(D) the acquisition or establishment of
significant infrastructure and/or facilities.
(ii) Kinesoft shall request a Capital Advance by
submitting to Softbank a written request therefor
in accordance with Section 5.04 (a "Draw
Request"), which Draw Request shall set forth:
(A) the amount of the requested Advance; (B) a
description of the proposed use of the proceeds
of such Advance, including information which a
prudent corporate director would reasonably
request in order to evaluate a proposed corporate
action (such as the terms of the proposed
transaction and its strategic fit within the
Business Plan; information regarding any
acquisition target (if applicable) and/or of the
technologies, assets, facilities or personnel
involved in the transaction; and relevant
financial information regarding the expected
impact of the transaction on Kinesoft) and (C)
the proposed funding date. SOFTBANK shall respond
to a Draw Request as soon as practicable under
the circumstances, but not later than 20 Business
Days following the date of the Draw Request (and
not later than 10 Business Days if such Draw
Request is for $2,000,000 or less); and, if such
Draw Request is approved pursuant to subsection
(iii) below make such Capital Advance to
Kinesoft at Kinesoft's direction on the requested
funding date, in U.S. dollars and in immediately
(iii) In the case of a Capital Advance in excess of
$2,000,000, SOFTBANK shall make the Capital
Advance described in the applicable Draw Request
upon approval thereof by a majority of the board
of directors of Kinesoft, which approval shall
include the approval of at least one
representative of SOFTBANK on such board. In the
case of a Capital Advance of $2,000,000 or less,
SOFTBANK shall make the Capital Advance described
in the applicable Draw Request upon approval
thereof by at least one representative of
SOFTBANK on the board of directors of Kinesoft.
Capital Advances shall be made by SOFTBANK in
connection with transactions which are reasonably
calculated to achieve the goals set forth in the
Business Plan, including transactions of the type
described in subsections (i)(A), (B), (C), and
(D) above, and SOFTBANK will not unreasonably
withhold or delay funding of any appropriate Draw
Request. Kinesoft shall be allowed to draw a
Capital Advance under this Agreement
notwithstanding that Kinesoft may have other
sources of financing therefor or may have other
funds available to it.
(iv) if there is a denial of a Draw Request in
whole or in part, SOFTBANK shall provide Kinesoft
with a detailed explanation of the basis for such
denial and the terms upon which SOFTBANK's
decision with respect thereto would be reversed.
(Defs.' Ex. 9, at §§ 2.01(d)-(e)) (underlining in original).
Section 5.04 of the 1997 Agreement, which is referred to in
Section 2.01(e)(ii), provides the manner that notice is to be
given and to whom it is to be directed:
Section 5.04. Notice. All notices, consents or
other communications shall be in writing, and shall
be deemed to have been duly given and delivered when
delivered by hand, or when mailed by registered or
certified mail, return receipt requested, postage
prepaid, or when received via telecopy, telex or
other electronic transmission, in all cases addressed
to the party for whom intended at its address set
If to SOFTBANK: SOFTBANK Holdings Inc.
Attention: Ronald D. Fisher
If to Kinesoft: Kinesoft Development Corp.
Attention: Peter Sills, Chairman
and Chief Executive Officer
or such other address as a party shall have
designated by notice in writing to the other party
given in the manner provided by this Section.
(Pl.'s Ex. A, 1997 Agreement § 5.04) (bold face and underlining
The 1997 Agreement also addresses future amendments,
modifications or waivers of its terms:
Section 5.01. Amendments and Waivers. The parties
agree to consider proposed amendments or
modifications of the terms or provisions of this
Agreement but no such proposed amendment shall be
binding unless the same shall be in writing and duly
executed by the parties hereto. No waiver of any of
the provisions of this Agreement shall be deemed to
or shall constitute a waiver of any other provisions
hereof. No delay on the part of any party in
exercising any right, power or privilege hereunder
shall operate as a waiver thereof.
(Pl.'s Ex. A, 1997 Agreement § 5.01) (bold face and underlining
in original). Finally, the 1997 Agreement also contains a merger
and integration clause, which provides as follows:
Section 5.02. Entire Agreement. This Agreement,
together with the Release, sets forth the entire
understanding of the parties with respect to the
subject matter hereof. Any previous agreement or
understandings between the parties regarding the
subject matter hereof are merged into and superseded
by this Agreement and the Release.
(Id., § 5.02) (bold face and underlining in original).
C. Prior Requests for Capital Advances.
Prior to the summer of 1999, Kinesoft made three requests for
Capital Advances that Softbank approved — although only two
requests were actually funded (Defs.' Facts ¶¶ 20-22). We address
each of those requests for Capital Advances in chronological
On May 20, 1997, Kinesoft initiated its first request for a
Capital Advance by sending an e-mail to Mr. Fisher seeking
$250,000 to pay for "extraordinary" expenses relating to hiring
(Defs.' Facts ¶ 20; Defs.' Ex. 17). Although there was no
proposed funding date included in the initial e-mail (Pl.'s Add'l
Facts ¶ 70), Mr. Fisher did not deny the request on that basis.
Instead, he noted that a Capital Advance could not be made until
the 1997 Agreement was signed (Defs.' Facts ¶ 20; Defs.' Ex. 17).
That agreement was signed on June 12, 1997, and by a letter dated
June 24, 1997, Kinesoft confirmed the request for a Capital
Advance. In the June 24, 1997 letter, Kinesoft asked that the
funding be provided immediately (Defs.' Facts, Ex. 9).
Thereafter, Softbank approved the request and made the Capital
Advance for $250,000 (Defs.' Facts ¶ 20).
In the fall of 1997, Kinesoft initiated a second request for a
Capital Advance: this one for approximately $6.5 million to fund
the acquisition of two PC games being developed by third parties
(Defs.' Facts ¶ 21; Defs.' Ex. 18). On behalf of Softbank, Mr.
Fisher and Mr. Mason requested further financial information
about these acquisitions (Defs.' Facts ¶ 21). On December 3,
1997, after receiving additional information, Mr. Fisher approved
the request (Defs.' Facts ¶ 21; Defs.' Ex. 18). However,
Kinesoft's Board of Directors never voted on approval of this
request (Pl.'s Add'l Facts ¶ 71), and the funds were
never advanced because the Kinesoft acquisition opportunity
became unavailable (Defs.' Facts ¶ 21; Defs.' Reply Facts ¶ 71).
As with the May 1997 request, Kinesoft's initial request for the
$6.5 million advance did not contain a proposed funding date
(Pl.'s Add'l Facts ¶ 71; Pl.'s Ex. Q). However, Softbank did not
deny the request for a Capital Advance on that basis: rather, in
response to that request, Softbank requested (and Kinesoft
provided) specific funding dates (Defs.' Reply ¶ 71; Defs.' Ex.
On or about May 1, 1998, Kinesoft initiated a third request for
a Capital Advance by sending an e-mail to Mr. Fisher seeking
$1.32 million for "capital equipment expenditures" to be made in
two installments (Defs.' Facts ¶ 22; Pl.'s Ex. 20). Again,
Kinesoft's request did not include a proposed funding date; and
this time, the request also did not include a description of the
proposal, but it did list the equipment Kinesoft sought to
purchase (Pl.'s Add'l Facts ¶ 72). Softbank sought no further
details concerning the proposed acquisition. However, in an
e-mail dated May 11, 1998, Kinesoft specifically requested that
Softbank advance the funds within 30 days of Kinesoft's request
(Defs.' Reply Facts ¶ 72; Defs.' Ex. 20). On that same date,
Softbank approved the request for a Capital Advance (and the
proposed 30-day funding date), and subsequently advanced the
first installment of approximately $998,000 (Defs.' Facts ¶ 22).
The second installment was never paid because Kinesoft withdrew
the request for the balance of that Capital Advance (Id.).
D. The Introduction of Mr. Levy Into The Relationship.
On October 27, 1998, Mr. Fisher contacted Mr. Jordan Levy about
assisting Softbank in its dealings with Kinesoft. Mr. Levy was a
significant shareholder of Softbank Corporation and "two or three
Softbank funds." (Pl.'s Ex. K, Levy Dep., at 22, 25-26).
In his first overture to Mr. Levy, Mr. Fisher stated as
. . as you know we still have an investment in
Kinesoft. The games business is not an area that I
understand particularly well, and I am concerned
about the ongoing level of investment in the Company.
I also think that based on the history I am too
"understanding" of their problems (read I need a
hard-ass!). Is this something that you would be
interested in helping me on?
(Pl.'s Ex. H: 10/27/98 Fisher e-mail to Levy). Mr. Levy indicated
his willingness to help, and on October 30, 1998, Mr. Fisher
asked Mr. Levy to "join the [Kinesoft] Board and represent
Softbank's interests" for the purpose of helping Softbank "figure
out where the company is really headed and whether there is any
hope of realizing any value from it" (Pl.'s Ex. H: 10/30/98
Fisher e-mail to Levy). On November 2, 1998, Mr. Levy wrote to
indicate his agreement to Mr. Fisher's request, and stated his
understanding of what his role could entail: "I just want
everyone to know that I am taking on the Harvey Keitel role in
Pulp Fiction vs being the one who brought this baby to Softbank.
I will do everything that I can to help them get successful"
(Id.: 11/02/98 Levy e-mail to Fisher).*fn5
Mr. Sills testified that, during a telephone call in late 1998,
Mr. Fisher first advised Mr. Sills and Mr. Spitzer that he would
like to put Mr. Levy on the Kinesoft Board of Directors in place
of Mr. Fisher (Pl.'s Ex. D, Sills Dep., at 435). Messrs. Sills
and Spitzer spoke with Mr. Levy, and
thereafter, Mr. Sills informed Mr. Fisher that Kinesoft perceived
a conflict of interest with Mr. Levy as the Kinesoft Director
representing Softbank's interests (Id., at 435, 437). In March
1999, Mr. Sills interviewed Mr. Levy for a possible seat on
Kinesoft's Board, and the two of them discussed Kinesoft's
business and strategy (Defs.' Facts ¶ 25). Thereafter, on April
8, 1999, Mr. Sills sent an e-mail to Mr. Fisher which did not
specifically raise any conflict issue, but instead addressed
different concerns that had arisen from the meeting with Mr.
Levy. Mr. Sills wrote that "Jordan led me to believe that
Softbank had taken a new strategic direction and therefore would
not be honoring its additional funding obligations under [the]
June 1997 Agreement" (Defs.' Facts ¶ 25; Defs.' Ex. 23, at KS
Mr. Fisher responded that Softbank intended to "honor" its
"funding obligations under the 1997 Agreement," but he harbored
concerns over whether Kinesoft could achieve the goal of its
Business Plan: that is, to become a "leader in the interactive
entertainment industry" (Pl.'s Ex. I: 04/26/99 Fisher e-mail to
Sills). In that e-mail, Mr. Fisher also reiterated his desire to
have Mr. Levy serve on Kinesoft's Board:
We will certainly honor our funding obligations under
the 1997 Agreement. We would not unreasonably
withhold funding we had agreed to advance. However,
this commitment was to achieve Kinesoft's Business
Plan to become a leader in the interactive
entertainment industry. The obligation is to fund . .
. transactions reasonably calculated to achieve the
goals in the Business Plan.
We are, of course, willing to review in good faith
future requests for capital as contemplated by the
Agreement. Nevertheless, we have reservations whether
Kinesoft can realistically be a potential leader in
the interactive entertainment industry. If not, any
proposed transaction will [sic] fail the test of
being reasonably calculated to achieve this goal. I
thought you should know of our reservations now
rather than later if we have to turn down requests
for capital. I would also like to designate Jordan as
Softbank's official Board member for Kinesoft. In
this way we can be sure that we handle any requests
that you have as expeditiously as possible.
You also apparently misunderstood Jordan's suggestion
that you consider investing in the Internet. We are
certainly not urging you to take one course or
another. We both believe strongly in the potential
for Internet ventures. Jordan was trying to be
constructive in indicating what he would do with
(Id.). Mr. Sills testified that, after he received the April
26, 1999 e-mail, he "believed that Jordan Levy was on the Board
of Directors by virtue of the April 26, 1999 e-mail from Ronald
Fisher, and began to treat him as such" (Pl.'s Add'l Facts ¶ 78;
Pl.'s Ex. O, Sills Aff. ¶ 10).
E. The Digital Anvil Proposal.
On August 6, 1999, Mr. Sills and Mr. Spitzer flew to Buffalo,
New York for a planned meeting with Mr. Levy (Answer ¶ 22; Pl.'s
Add'l Facts ¶ 81-82). Mr. Levy knew that Messrs. Sills and
Spitzer planned to ask for a Capital Advance (Pl.'s Add'l Facts ¶
81; Pl.'s Ex. D, Sills Dep., at 504-06; Defs.' Reply Facts ¶ 81;
Pl.'s Ex. K, Levy Dep., at 204-05), although he did not know in
advance of the meeting the details of the proposed use of the
funds (Pl.'s Add'l Facts ¶ 81).*fn6
During the August 6 meeting, Mr. Sills and Mr. Spitzer
presented to Mr. Levy a proposal to obtain a Capital Advance from
Softbank to fund a joint business venture with Digital Anvil, an
established company (Pl.'s Add'l Facts ¶ 81). In exchange for $5
million capital to be supplied by Kinesoft, Digital Anvil offered
Kinesoft the opportunity to gain early access to the "Playstation
2" development through Digital Anvil's connections with Sony
(Pl.'s Add'l Facts ¶¶ 81-82; Defs.' Ex. 29, at S0012-S0015).
According to the plan advanced by Mr. Sills and Mr. Spitzer at
this meeting, Kinesoft sought to form a new company with Digital
Anvil, to be called "NewCo," which would create games for
Playstation 2 (Pl.'s Ex. U: 8/9/99 Levy e-mail to Fisher). The
"talking document" that comprised the written Digital Anvil
proposal made to Mr. Levy did not contain a "proposed funding
date" (Defs.' Facts ¶ 33).*fn7
The parties agree that Kinesoft presented Mr. Levy with a
binder of materials explaining the Digital Anvil proposal, and
that Messrs. Levy, Sills and Spitzer discussed that proposal and
the materials at length (Pl.'s Add'l Facts ¶ 82). However, the
parties dispute whether the proposal made by Kinesoft at the
August 6, 1999 meeting can be labeled a "Draw Request" under the
terms of the 1997 Agreement (Defs.' Reply Facts ¶ 81). And, the
parties dispute precisely what Mr. Levy said in response to
Kinesoft's proposal during that meeting.
Kinesoft offers evidence (by the deposition testimony of Mr.
Sills and Mr. Spitzer) that at the meeting, Mr. Levy stated as
follows (Pl.'s Add'l Facts ¶ 82):
(a) Kinesoft would have no further access to the
funds for the Digital Anvil deal or any other
deal or use. The nature of the use and/or deal
was totally irrelevant.
(b) Softbank had no further interest in Kinesoft or
the business Kinesoft was in.
(c) It was through no fault of Kinesoft, but Kinesoft
no longer had the right partner — Softbank had
basically just changed its mind and was now
focused solely and exclusively on the Internet.
(d) Masayoshi Son had requested that Levy be a
"prick" in dealing with Kinesoft and that he
needed someone to be a "prick" with Kinesoft in
order to get what he wanted.
(e) The problem was not just Kinesoft, but that
Softbank was moving quickly to divest itself of
all of its non-Internet holdings because it was
going to be a "pure" Internet company.
(g) Softbank had rights under the Shareholders
Agreement and would be exercising them. Softbank
did not have to honor its commitments of funding
since Kinesoft was not a leader in interactive
entertainment, and Softbank had discretionary
power over the spending of more than $500,000 by
Kinesoft and would not approve any such
expenditures going forward.
(h) If Peter Sills took $5 million out of the company
and bought out Softbank's interest, he could do
whatever he wanted with the company.
(i) If Peter Sills did not like it, what was he going
to do, sue Softbank, a huge multinational
concern? Softbank's power in the industry is
great and it is much better to be its friend than
its enemy. If Peter Sills elected to sue
Softbank, he would have to do so with his own
funds, . . . .
Softbank asserts that Mr. Levy merely informed Messrs. Sills
and Spitzer that he did not think that Kinesoft's "potential
transaction with Digital Anvil was advisable because he believed
that Kinesoft ought to focus on its `core business,'" and he did
not believe that the Digital Anvil deal was "a good strategy for
a small company with a limited number of key executives" (Defs.'
Reply ¶ 82). Softbank denies most of the statements attributed to
Mr. Levy at the meeting, and specifically denies that Mr. Levy
said at this meeting that Softbank had no interest in Kinesoft;
instead, Softbank asserts that Mr. Levy "merely observed that
Softbank's business had `shifted towards the Internet'" (Id.).
Finally, Softbank concedes that Mr. Levy "suggested to Mr. Sills
that, under the right circumstances, it might be sensible for
Kinesoft to purchase Softbank's equity investment in Kinesoft,"
but denies that Mr. Levy told Mr. Sills that Kinesoft should buy
out Softbank's interest for $5 million (Id.).
After his meeting with Messrs. Sills and Spitzer, Mr. Levy sent
an e-mail to Mr. Fisher summarizing the Kinesoft proposal (Pl.'s
Add'l Facts ¶ 83). The parties disagree as to whether Mr. Levy's
August 9, 1999 e-mail forwarded to Mr. Fisher a "Draw Request" by
Kinesoft for capital to fund the Digital Anvil venture (Defs.'
Reply Facts ¶ 83). The August 9 e-mail states in relevant part:
I met with Peter Sills and Ron Spitzer in Buffalo
last Friday. They have been speaking with me over the
last several weeks about [sic] [their] entry into the
Playstation 2 gaming business. They have a proposal
to enter into a joint venture with Digital Anvil . .
. to form a[n]ew company to produce a Playstation 2
game . . .
The deal would be a $5MM commitment as follows:
A. [P]ay NewCo $250,000 for Playstation 2