Maxim Integrated Products, the Sunnyvale chip maker that hasn’t filed financial reports with the Securities and Exchange Commission since May 2006 because of an investigation into its past stock option granting practices, said Monday it reached a settlement of a shareholder lawsuit over the matter.
The legal action, brought against some of the company’s current and former executive officers and directors, included no admission of “wrongdoing or fault” on their part. Such settlements almost never do.
However, three current members of Maxim’s board of directors — James Bergman, Kipling Hagopian and A.R. Frank-Wazzan — are set to cough up a total of about $1.5 million in order to “remediate excess gains” they “incorrectly received” due to “allegedly misdated stock options” that were issued to them. The exercise price of some stock options previously granted to them will also be raised as part of the settlement.
Jack Gifford, the company’s “former chief executive” — who remains nameless throughout the release — has evidently agreed to pay $6 million to the company he founded as part of the settlement. He will also cancel vested but unexercised stock options for approximately 3.1 million shares of Maxim stock he held.
Maxim’s former chief financial officer, Carl Jasper — also unnamed throughout the release — will give up claims on about 97,000 vested in-the-money stock options that expired during the mandatory option exercise suspension period that has been part of the company’s failure to file mandatory financials with the SEC.
In December, the SEC filed civil charges against both Gifford and Jasper accusing them of rigging options for employees. Gifford agreed to pay nearly $800,000 in a settlement with the SEC, while Jasper continued to fight the charges.
The lawyering bill dedicated to this chapter of Maxim’s history is bound to be huge if the linguistic acrobatics of the company’s press release announcing the deal is any indication.
Lawyers for the plaintiffs in the action will receive “no more than” $15 million in legal fees and $500,000 in out-of-pocket expenses. Maxim reserved for itself the “right to object to the amount of such fees and expenses,” which the company will pay out of the $21 million Maxim will be paid by the liability insurers indemnifying its directors and officers.
In January, the company 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 mispriced options. The restatements have yet to be filed, but “(t)his tentative settlement represents an important milestone in Maxim’s efforts to resolve all outstanding issues related to the company’s past stock option practices,” said its current CEO Tunc Doluca.
That said, the company also pointed out that “No assurances can be given” that other “derivative actions pending in State and Federal Courts in California will be dismissed as a result of this settlement.”
A year ago, Maxim became the second Silicon Valley company to have its stock delisted from the Nasdaq stock exchange until it can restate its financial reports because of stock option-related investigations. The company’s stock is now traded on the Pink Sheets, a private listing service.