Electronics Production | March 24, 2011
Broadcom settles with former Board members
Broadcom announed that the remaining defendants in the federal consolidated shareholder derivative action relating to the company's historical stock option accounting practices have entered into a settlement.
Federal shareholder derivative actions were filed in 2006 by certain named shareholder plaintiffs against each of the then members of Broadcom's Board of Directors and certain current and former officers. The actions, which were later consolidated, sought recovery for the company's benefit. As previously disclosed, in August 2009 Broadcom, through its Special Litigation Committee, plaintiffs and certain of the defendants entered into a partial settlement in the federal derivative action. The partial settlement resolved all claims in the action, other than those against three individuals: Dr. Henry T. Nicholas, III, Broadcom's former President and Chief Executive Officer and former Co-Chairman of the Board, William J. Ruehle, Broadcom's former Chief Financial Officer, and Dr. Henry Samueli, Broadcom's Chief Technical Officer and current nominee to the Board. The preliminary settlement announced today will resolve those remaining claims. The settlement is subject to approval by the United States District Court for the Central District of California. If the settlement is given final approval by the Court, among other things: - Broadcom will receive payment from Dr. Nicholas of USD 26.6 million; - Mr. Ruehle will execute a Notice of Dismissal with Prejudice of an action filed by him against Broadcom, which seeks damages in excess of USD 26 million; - Broadcom will cancel unexercised Broadcom stock options held by Dr. Samueli of USD 24.3 million, which amount was determined for purposes of the settlement; - Dr. Samueli will contribute USD 2.3 million in cash to the Broadcom Foundation; and - Dr. Nicholas, Mr. Ruehle and Dr. Samueli will be dismissed with prejudice from the federal consolidated shareholder derivative litigation. If the Court accepts the parties' proposed schedule for approving the settlement, it is expected that a final approval hearing will occur before the end of the second quarter, ending June 30, 2011. In connection with the proposed settlement, Broadcom currently expects to report a one-time gain of approximately USD 50 million during the quarter in which Broadcom receives the cash payment from Dr. Nicholas and Dr. Samueli's stock options are cancelled. Broadcom has agreed to pay plaintiffs' counsel USD 25 million of the settlement proceeds for attorneys' fees, expenses, and costs, subject to Court approval. In addition, upon final Court approval and receipt of the settlement consideration, Broadcom expects to contribute USD 25 million to the Broadcom Foundation. Accordingly, it is expected that the settlement will have a neutral effect on Broadcom's consolidated statement of income in the quarter in which such settlement occurs. "We are pleased to report that this long-running litigation is drawing to a close," said Scott McGregor, Broadcom's CEO. "At the same time we are gratified that we can devote a portion of this one-time gain to the Broadcom Foundation to further support STEM education programs and a range of community services."
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