MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH (68581)
ALAN SCHULMAN (128661)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
     - and -
JEFFREY W. LAWRENCE (166806)
LISA C. ATKINSON (163320)
DAVID R. STICKNEY (188574)
222 Kearny Street, 10th Floor
San Francisco, CA 94108
Telephone: 415/288-4545

LAW OFFICES OF JAMES V.
BASHIAN, P.C.
JAMES V. BASHIAN
500 Fifth Avenue
Suite 2700
New York, NY 10110
Telephone: 212/921-4110

WOLF POPPER LLP
STEPHEN D. OESTREICH
PATRICIA I. AVERY
845 Third Avenue
New York, NY 10022
Telephone: 212/759-4600

I. INTRODUCTION

II. SUMMARY OF ACTION

III. PROCEDURAL BACKGROUND

IV. THE PROPOSED LEAD PLAINTIFFS ARE THE MOST ADEQUATE PLAINTIFFS UNDER THE EXCHANGE ACT

A. Movants Have The Largest Financial Interest In The Related Actions

B. The Proposed Lead Plaintiffs Are Qualified Under Rule 23

1. The Claims Of The Proposed Lead Plaintiffs Are Typical Of The Claims Of The Class

2. The Proposed Lead Plaintiffs Will Fairly And Adequately Represent The Interests Of The Class

V. THIS COURT SHOULD APPROVE THE PROPOSED LEAD PLAINTIFFS' CHOICE OF LEAD COUNSEL

VI. CONCLUSION

TO: ALL PARTIES AND THEIR COUNSEL OF RECORD HEREIN:

NOTICE IS HEREBY GIVEN that on March 10, 1998, at 2:00 p.m., or as soon thereafter as this motion may be heard before the Honorable Saundra Brown Armstrong, Courtroom Number 3, 1301 Clay Street, Oakland, California, plaintiffs Albert J. Copperstone and Joseph Siciliano ("Movants" or "Proposed Lead Plaintiffs"), who collectively purchased 4,475 shares of TCSI Corporation ("TCSI" or the "Company") common stock between October 11, 1995 and September 25, 1996 (the "Class Period"), by and through their counsel, move this Court, pursuant to §21D(a)(3)(B) of the Securities Exchange Act of 1934 (the "Exchange Act"), as amended by the Private Securities Litigation Reform Act, Pub. L. 104-67, 109 Stat. 737 (1995) (the "PSLRA"), for an order appointing them as Lead Plaintiffs in this securities class action and for the approval of their selection of Milberg Weiss Bershad Hynes & Lerach LLP ("Milberg Weiss"), Wolf Popper LLP ("Wolf Popper") and The Law Offices of James V. Bashian, P.C. ("James V. Bashian"), as Co-Lead Counsel, for the class pursuant to §21D(a)(3)(B)(v), 15 U.S.C. §78u-4(a)(3)(B)(v).

This motion is made on the grounds that Proposed Lead Plaintiffs are the "most adequate plaintiffs," as provided in the PSLRA. They have a substantial financial interest in the relief sought by the class, they meet the requirements of Fed. R. Civ. P. 23 in that their claims are typical of the claims of the class and the Proposed Lead Plaintiffs will fairly and adequately represent the interests of the class. In addition, the Proposed Lead Plaintiffs have selected Milberg Weiss, Wolf Popper and James V. Bashian as Co-Lead Counsel, firms with substantial experience in the area of securities litigation, to serve as Co-Lead Counsel for the class.

This motion is based upon this notice of Motion and Motion, the Memorandum of Points and Authorities and the Declaration of David R. Stickney filed concurrently herewith, as well as the complete files and records in the action and such other evidence as the Court may consider at the hearing on this motion.

I. INTRODUCTION

This action is a securities class action lawsuit that is presently pending in this district. Proposed Lead Plaintiffs allege violations of the Exchange Act on behalf of purchasers of TCSI common stock. The plaintiffs further allege that these violations took place during the Class Period. Now, Movants submit this memorandum in support of their motion for: (i) appointment to serve as Lead Plaintiffs in this action; and (ii) approval of the Proposed Lead Plaintiffs' selection of Co-Lead Counsel in this action and any other actions that may be consolidated therewith.

Section 21D of the Exchange Act, as amended by the PSLRA, sets forth an entirely new procedure for the selection of lead plaintiffs in securities class actions brought after December 22, 1995.⁽¹⁾ Specifically, §21D(a)(3)(A)(i) of the Exchange Act provides that, within 20 days after the date on which an initial securities class action is filed alleging violations of either the Securities Act of 1933 or the Exchange Act,

the plaintiff or plaintiffs shall cause to be published, in a widely circulated national business-oriented publication or wire service, a notice advising members of the purported plaintiff class --

(I) of the pendency of the action, the claims asserted therein, and the purported class period; and

(II) that, not later than 60 days after the date on which the notice is published, any member of the purported class may move the court to serve as lead plaintiff of the purported class.

15 U.S.C. §78u-4(a)(3)(A)(i).

Further, §21D(a)(3)(B) of the Exchange Act directs the Court to consider motions by plaintiffs or purported class members to serve as Lead Plaintiffs in response to any such notice within 90 days after the date the notice is published, or as soon as practicable after the Court decides any pending motion to consolidate actions asserting substantially the same claim or claims. These sections also create the presumption that the "most adequate plaintiff" to serve as lead plaintiff is the person, or group of persons, that:

(aa) has either filed the complaint or made a motion in response to a notice;

(bb) in the determination of the court, has the largest financial interest in the relief sought by the class; and

(cc) otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure.

15 U.S.C. §78u-4(a)(3)(B)(iii).

Here, in accordance with the above provisions, Proposed Lead Plaintiffs move to serve as Lead Plaintiffs in this action. By purchasing 4,475 shares of TCSI stock during the Class Period, the Proposed Lead Plaintiffs suffered considerable out-of-pocket losses. Movants also seek the Court's approval of their selection of Milberg Weiss, Wolf Popper and James V. Bashian as Co-Lead Counsel for the class.

II. SUMMARY OF ACTION

The Complaint alleges that TCSI and certain of its officers and directors engaged in massive securities fraud during the Class Period designed to inflate the price of TCSI stock and thereby enable defendants to sell millions of shares of their stock at dramatically inflated prices. Defendants accomplished the price inflation of TCSI's stock by making false statements intended to conceal the decline in TCSI's competitive position and business prospects, as well as by falsifying TCSI's financial reports and earnings.

Starting in October of 1995, defendants issued a steady beat of extremely positive statements about TCSI. The common thread running through these statements was that a strong demand existed for TCSI's products and that this demand was assisting TCSI in generating lucrative contracts. This, TCSI claimed, resulted in increased revenue and earnings per share.

The barrage of consistently upbeat statements had the desired effect, and TCSI's stock price climbed steadily higher through December 1995 and into 1996. The defendants continued to misrepresent TCSI's business condition and prospects. On January 25, 1996, for example, defendants told institutional investors, securities analysts and TCSI investors that they expected 50%-60% year-over-year growth in TCSI's telecommunications software business and a continued increase in earnings per share ("EPS"). TCSI reassured investors that there were no problems with TCSI's competitive position and that TCSI expected further EPS growth in the rest of 1996 and 1997, in part due to the expected close of a large contract with a Regional Bell Operating Company ("RBOC"). TCSI had another deal planned with United Postal Service ("UPS"), which, according to TCSI, would generate millions in revenue during 1996.

Yet, while TCSI issued its steady beat of positive statements, TCSI's financial condition was, the defendants knew, deteriorating. In truth, TCSI's competitive position was being eroded; the demand for its object-oriented software had softened and new orders had declined; TCSI would have to start funding its own research and development because its customers were no longer willing to do so; the likelihood of future contracts with customers had dropped significantly; the decline in orders was not due to seasonal factors but instead to the erosion of its competitive position; it was unlikely that TCSI would obtain a major contract from a RBOC during the third quarter of 1996 as the RBOC had indicated that it would likely not place that order before 1997; TCSI was having severe difficulties with its large UPS contract; the growth of TCSI's business had peaked in 1995; and the rate of TCSI's business had slowed materially due to the emergence of competitors.

Thus, to conceal its true financial condition, TCSI engaged in accounting chicanery designed to create the perception of a thriving business during the fourth quarter of 1995 and the first two quarters of 1996. Plaintiffs' Complaint for Violation of the Securities Exchange Act of 1934 (the "Complaint") focuses on, for instance, TCSI's treatment of its doomed contract with UPS. During mid-1995, when it was apparent to defendants that its important contract with UPS could not be completed and fulfilled profitably, TCSI failed to recognize the loss as mandated by Generally Accepted Accounting Principles ("GAAP") as set forth in FASB Statement of Accounting Standards No. 5.⁽²⁾ As a result, TCSI's reported earnings for the fourth quarter of 1995 and the first and second quarters of 1996 were materially overstated. Ultimately, UPS formally terminated the contract and TCSI belatedly disclosed the corresponding loss in revenues for the quarter ending September 30, 1996.

The Complaint further alleges that TCSI changed its revenue recognition policy with respect to software licensing fees to create the appearance of business growth when the Company was actually floundering. Prior to 1995, TCSI had a conservative approach to revenue recognition: "no revenue is recognized for unpaid license fees unless collection is assured." When business began to weaken in 1995, however, TCSI changed its revenue recognition policy. As a result, TCSI was able to recognize profits on software licensing agreements when collection of revenue was not assured. Collection was not assured because TCSI granted its customers cancellation privileges and special payment terms which rendered uncertain the likelihood of collecting revenue. By recognizing this revenue anyway, TCSI violated basic accounting principles, overstated its earnings for the fourth quarter of 1995, and caused a dramatic increase in TCSI's unbilled receivables account.

On September 25, 1996, when rumors began circulating that TCSI would not perform as represented, the price of TCSI stock dropped precipitously to $15-1/2 per share, a loss of $5-1/4. After the close of trading on September 25, TCSI admitted that, rather than a substantial growth in revenues and EPS, its revenue for the third quarter of 1996 would decline from the prior quarter and TCSI would suffer a loss. After that announcement, TCSI followed with more bad news. On October 17, 1996, TCSI reported that its revenues for the third quarter were only $9.8 million and that it would have to write-off the terminated UPS contract. With this news, the value of the stock dropped as low as $5-3/4 per share, a decrease of 81% from its Class Period high of $29-3/4.

Although defrauded investors suffered considerable losses, defendants managed to pocket more than $105 million by selling significant portions of their holdings when the stock's value was still inflated.

III. PROCEDURAL BACKGROUND

Proposed Lead Plaintiffs filed the Complaint on September 24, 1997, and the action was assigned to this Court. Pursuant to §21D(a)(3)(A)(i) of the Exchange Act, on September 25, 1997, Proposed Lead Plaintiffs published the required notice to class members on the Business Wire, a widely circulated business-oriented national wire service. Stickney Decl., Ex. B. The notice advised investors who purchased TCSI common stock during the Class Period of the pendency of the action and of their right to move this Court to be appointed Lead Plaintiffs within 60 days of publication of the notice.

Because the Proposed Lead Plaintiffs filed this motion prior to the expiration of the 60-day period from the publication of the notice, they have moved for appointment as Lead Plaintiffs in a timely manner. The Court, pursuant to §21D(a)(3) of the Exchange Act, must rule upon the motion (i) within 90 days from the date of the notice publication, or (ii) as soon as practicable after consolidating related actions, whichever is later.

IV. THE PROPOSED LEAD PLAINTIFFS ARE THE MOST ADEQUATE PLAINTIFFS UNDER THE EXCHANGE ACT

A. Movants Have The Largest Financial Interest In The Related Actions

The "most adequate plaintiff" provision of the PSLRA provides that a court

shall appoint as lead plaintiff the member or members of the purported plaintiff class that the court determines to be most capable of adequately representing the interests of class members (hereafter in this paragraph referred to as the "most adequate plaintiff") in accordance with this subparagraph.

15 U.S.C. §78u-4(a)(3)(B)(i) (emphasis added). When evaluating the adequacy of a proposed lead plaintiff, the Exchange Act, as amended by the PSLRA, requires a court to adopt a rebuttable presumption

that the most adequate plaintiff in any private action arising under this title is the person or group of persons that --

* * *

(bb) in the determination of the court, has the largest financial interest in the relief sought by the class.

15 U.S.C. §78u-4(a)(3)(B)(iii)(I) (emphasis added). Thus, the statutory language provides that a "member or members" of the class or a "person or group of persons" may combine to constitute "the largest financial interest" and thereby jointly serve as the "most adequate plaintiff."

Movants request, pursuant to §21D(a)(3)(B) of the Exchange Act, as amended by the PSLRA, that the Court appoint as Lead Plaintiffs Albert Copperstone and Joseph Siciliano. The Proposed Lead Plaintiffs collectively purchased no less than 4,475 shares of TCSI stock during the Class Period at prices artificially inflated by defendants' false and misleading statements. To counsels' knowledge, no other class member has filed a related complaint or moved to be appointed lead plaintiff. Movants, then, collectively possess the largest financial interest in the outcome of this litigation and are presumed to be the most adequate plaintiffs. §78u-4(a)(3)(B)(iii).⁽³⁾

In addition, Proposed Lead Plaintiffs are qualified to represent the class. Both Mr. Copperstone and Mr. Siciliano have signed and filed sworn certifications stating that they have reviewed the Complaint, have authorized its filing and are willing to serve as representative parties on behalf of the class. Stickney Decl., Ex. C. Moreover, the Proposed Lead Plaintiffs have selected and retained class counsel highly experienced in prosecuting securities class actions such as this to represent them. Stickney Decl., Exs. D, E and F.

Accordingly, Proposed Lead Plaintiffs satisfy the prerequisites for appointment as Lead Plaintiffs pursuant to §21D(a)(3)(B).

B. The Proposed Lead Plaintiffs Are Qualified Under Rule 23

Section 21D(a)(3)(B)(iii)(I)(cc) of the Exchange Act provides that, in addition to possessing the largest financial interest in the outcome of the litigation, lead plaintiffs must also "otherwise satisf[y] the requirements of Rule 23 of the Federal Rules of Civil Procedure." At this stage in the proceedings, a prima facie showing that the Proposed Lead Plaintiffs satisfy the requirements of Rule 23 is sufficient. Greebel v. FTP Software, 939 F. Supp. 57, 64 (D. Mass. 1996).

Rule 23(a) requires that the claims be typical of the claims of the class and that the representative will fairly and adequately protect the interests of the class. As detailed below, each of the Proposed Lead Plaintiffs satisfies the typicality and adequacy requirements of Rule 23(a), thereby justifying their appointment as Proposed Lead Plaintiffs.

1. The Claims Of The Proposed Lead Plaintiffs Are Typical Of The Claims Of The Class

The typicality requirement of Rule 23(a)(3) is satisfied when the named plaintiffs have: (i) suffered the same injuries as the absent class members; (ii) as a result of the same course of conduct by defendants; and (iii) their claims are based on the same legal issues. Milonas v. Williams, 691 F.2d 931, 938 (10th Cir. 1982); Shields v. Smith, [1992 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶97,001, at 94,376 (N.D. Cal. Aug. 19, 1992); In re Activision Sec. Litig., 621 F. Supp. 415 (N.D. Cal. 1985). The questions of law and fact common to the members of the class which predominate over questions which may affect individual class members include the following:

(a) Whether the federal securities laws were violated by defendants;

(b) Whether defendants omitted and/or misrepresented material facts;

(c) Whether defendants knew, had reason to know or recklessly disregarded that their statements were false and misleading or failed to have a reasonable basis for those statements;

(d) Whether the price of TCSI stock was artificially inflated during the Class Period; and

(e) The extent of damage sustained by class members and the appropriate measure of damages.

There is a well-defined community of interest in the questions of law and fact involved in this case. Thus, the claims asserted by the Proposed Lead Plaintiffs are typical of the claims of the members of the proposed class. Each of the Proposed Lead Plaintiffs alleges, as do the members of the class, that defendants violated the Exchange Act by publicly disseminating a series of false and misleading statements concerning TCSI's business condition and prospects. Each of the Proposed Lead Plaintiffs acquired TCSI stock at prices inflated by defendants' misrepresentations and omissions and was damaged thereby.

Thus, typicality is satisfied because the claims asserted by the Proposed Lead Plaintiffs are based on the same legal theory and arise "from the same event or course of conduct giving rise to the claims of other class members." In re United Energy Corp. Solar Power Modules Tax Shelter Inv. Sec. Litig., 122 F.R.D. 251, 256 (C.D. Cal. 1988); see also generally Shump v. Balka, 574 F.2d 1341, 1344 (10th Cir. 1978); American Employers' Ins. Co. v. King Resources Co., 545 F.2d 1265, 1269 (10th Cir. 1976).

2. The Proposed Lead Plaintiffs Will Fairly And Adequately Represent The Interests Of The Class

The interests of the Proposed Lead Plaintiffs are clearly aligned with the members of the proposed class, and there is no evidence of any antagonism between the interests of these individuals and the proposed class members. As detailed above, the Proposed Lead Plaintiffs share substantially similar questions of law and fact with the members of the proposed class, and their claims are typical of the members of the class. The Proposed Lead Plaintiffs are willing to serve as, and assume the responsibilities of, class representatives. In addition, the Proposed Lead Plaintiffs have selected and retained experienced class counsel to represent them in this action.

V. THIS COURT SHOULD APPROVE THE PROPOSED LEAD PLAINTIFFS' CHOICE OF LEAD COUNSEL

The PSLRA vests authority in the Lead Plaintiffs to select and retain lead counsel, subject to court approval. See §78u-4(a)(3)(B)(v). Thus, the Court should not disturb the Proposed Lead Plaintiffs' choice of counsel unless "necessary to protect the interests of the plaintiff class." See H.R. Conf. Rpt. No. 104-369, at 62, 104th Cong. 1st Sess., Statement of Managers (November 28, 1995). Stickney Decl., Ex. G. The Proposed Lead Plaintiffs have selected the law firms of Milberg Weiss, Wolf Popper and James V. Bashian to serve as Co-Lead Counsel for the class. These firms possess extensive experience in the area of class action litigation and have successfully prosecuted numerous securities fraud class actions on behalf of injured investors. See Stickney Decl., Exs. D, E and F. Thus, the Court may be assured that, in the event the instant motion is granted, the members of the class will receive the highest caliber legal representation available.

VI. CONCLUSION

For all the foregoing reasons, Movants respectfully request that the Court: (i) appoint the Proposed Lead Plaintiffs as Lead Plaintiffs in the above-captioned action, pursuant to §21D(a)(3)(B); and (ii) approve the Proposed Lead Plaintiffs' choice of Milberg Weiss, Wolf Popper and James V. Bashian as Co-Lead Counsel for the class.

TCSI\LSN00508.BRF

1. Congress amended the Exchange Act via the enactment of the PSLRA. These amendments are contained in Pub. L. No. 104-67, 109 Stat. 737 (1995), §101, entitled the "Private Securities Litigation Reform Act of 1995." A copy of the relevant section of the PSLRA is attached as Ex. A to the Declaration of David Stickney in Support of Plaintiffs' Motion for Appointment of Co-Lead Plaintiffs and Approval of Plaintiffs' Selection of Co-Lead Counsel ("Stickney Decl."), filed concurrently herewith.

2. GAAP are those principles recognized by the Securities and Exchange Commission (the "SEC") and the accounting profession as the conventions, rules and procedures necessary to define accepting accounting practices. SEC regulation S-X (17 C.F.R. §210.4-01(a)(1)). Financial statements submitted to the SEC which are not prepared in accordance with GAAP are presumed to be misleading and inaccurate.

3. Only class members who have filed a complaint or made a motion pursuant to §21D(a)(3)(B) are eligible to be appointed lead plaintiffs.

I, the undersigned, declare:

1. That declarant is and was, at all times herein mentioned, a citizen of the United States and a resident of the County of San Francisco, over the age of 18 years, and not a party to or interested in the within action; that declarant's business address is 222 Kearny Street, 10th Floor, San Francisco, California 94108.

2. That on November 24, 1997, declarant served the PLAINTIFFS' NOTICE OF MOTION, MOTION AND MEMORANDUM OF POINTS AND AUTHORITIES FOR APPOINTMENT OF LEAD PLAINTIFFS AND APPROVAL OF PLAINTIFFS' SELECTION OF CO-LEAD COUNSEL by depositing a true copy thereof in a United States mailbox at San Francisco, California in a sealed envelope with postage thereon fully prepaid and addressed to the parties listed on the attached Service List and that this document was forwarded to the following designated Internet site at:

3. Declarant caused a true copy of the above to be served via facsimile on the parties denoted on the attached Service List.

4. Declarant also caused a true copy of the above to be delivered to Federal Express for service on the parties denoted on the attached Service List on November 25, 1997.

5. That there is a regular communication by mail between the place of mailing and the places so addressed.

I declare under penalty of perjury that the foregoing is true and correct. Executed this 24th day of November, 1997, at San Francisco, California.