Maxim Integrated Products, Inc. (NASDAQ:MXIM), the Sunnyvale chip maker, announced that the company, certain of its current and former executive officers and directors, and plaintiffs have entered into an agreement to settle a stockholder derivative action that was filed in the Court of Chancery of the State of Delaware.
The derivative lawsuit against Maxim Integrated Products, Inc. was filed in June 2006 and was based upon allegations of breach of fiduciary duty and unjust enrichment related to misdated stock options. The proposed settlement is subject to approval by the Court of Chancery of Delaware, Maxim Integrated Products, Inc admit any wrongdoing or fault on the part of Maxim, its board of directors or executive officers, or the other individual defendants to the action.
The proposed settlement includes among other things a cash payment to Maxim totaling approximately $28.5 million, less attorneys fees to plaintiff's counsel in an amount to be determined by the Court. The settlement funds consist of $21 million to be paid by Maxim's directors and officers liability insurers, $6 million to be paid by Maxim'sformer chief executive officer and approximately $1.5 million in the aggregate will be paid by James Bergman, Kipling Hagopian and A.R. Frank Wazzan, each of whom are current members of Maxim's board of directors. The contributions from Messrs. Bergman, Hagopian and Wazzan are to remediate excess gains each such director incorrectly received due to allegedly misdated stock options that were issued to them; Maxim's former chief executive officer will cancel vested but unexercised stock options for approximately 3.1 million shares of Maxim common stock held by him, Maxim's former chief financial officer will forgo any claims against Maxim he may have had with respect to approximately 97,000 vested in-the-money stock options that expired during the mandatory stock option exercise suspension period.
On June 6, 2006, Maxim Integrated Products, Inc was contacted by the SEC regarding an informal inquiry relating to the Maxim Integrated Products, Inc’s past stock options grants and practices. On December 4, 2007, Maxim Integrated Products, Inc settled the matter with the SEC without admission of any guilt or wrongdoing and without any assessment of penalties against the Company. On June 29, 2006, the Company received a subpoena from the U.S. Attorney for the Northern District of California requesting documents relating to its stock option grants and practices. Maxim Integrated Products, Inc cooperated with the U.S. Attorney and was informed that the U.S. Attorney’s office does not intend to pursue the matter.
In addition the SEC filed civil charges against former chief executive and former chief financial officer accusing them of rigging options for employees. The former chief executive agreed to pay nearly $800,000 in a settlement with the SEC, while former chief financial officer continued to fight the charges.
The company reportedly also said that it will restate some of its reports from fiscal 1997 through March 25, 2006, to record additional non-cash compensation worth $550 million to $650 million related to alleged mispriced options
Maxim Integrated Products is a publicly traded company that designs, manufactures, and sells over $2 billion of high-performance semiconductor products annually.