Blackberry 2009 Annual Report Download - page 28

RESEARCH IN MOTION LIMITED
management’s discussion and analysis of financial
condition and results of operations continued
FOR THE THREE MONTHS AND FISCAL YEAR ENDED FEBRUARY 28, 2009
26
As part of the OSC settlement, the Company agreed to
enter into an agreement with an independent consultant
to conduct a comprehensive examination and review of the
Company and report to the Company’s board of directors
and the staff of the OSC the Company’s governance practices
and procedures and its internal control over financial
reporting. A summary of the consultant’s recommendations
in the final report will be posted on the OSC’s website and
disclosed in the Company’s MD&A.
SEC Settlements
In addition, as announced by the Company on
February 17, 2009, the Company, Jim Balsillie, Mike
Lazaridis, Dennis Kavelman and Angelo Loberto, entered
into settlements with the SEC that resolved the previously
disclosed SEC investigation of the Company’s historical stock
option granting practices. The Company consented, without
admitting or denying allegations in a complaint filed by the
SEC, to the entry of an order enjoining it from violations of
certain provisions of the U.S. federal securities laws, including
the antifraud provisions. The Company was not required to
pay disgorgement or a monetary penalty.
Jim Balsillie and Mike Lazaridis consented, without
admitting or denying allegations in the complaint filed by the
SEC, to the entry of an order enjoining them from violations of
certain provisions of the U.S. federal securities laws, including
the non-scienter based antifraud provisions. The order also
provided that Jim Balsillie and Mike Lazaridis are liable for
disgorgement of profits gained as a result of conduct alleged
in the complaint together with prejudgment interest, although
it also provided that those amounts are deemed paid in full
because Jim Balsillie and Mike Lazaridis had already voluntarily
paid those amounts to the Company. Those repayments
were made earlier as part of a series of recommendations of a
Special Committee of the Company’s Board of Directors (the
“Special Committee”) following the Review.
Dennis Kavelman and Angelo Loberto consented, without
admitting or denying allegations in the complaint filed by the
SEC, to the entry of an order enjoining them from violations of
certain provisions of the U.S. federal securities laws, including
the antifraud provisions. The order also provided that Dennis
Kavelman and Angelo Loberto are liable for disgorgement of
profits gained as a result of conduct alleged in the complaint
together with prejudgment interest, although it also provided
that those amounts are deemed paid in full because Dennis
Kavelman and Angelo Loberto had already voluntarily paid
those amounts to the Company at the same time and on the
Balsillie, the Co-Chief Executive Officer of the Company,
Mike Lazaridis, the President and Co-Chief Executive Officer
of the Company, Dennis Kavelman, previously Chief Financial
Officer of the Company (currently with the Company in
another role), Angelo Loberto, previously Vice-President
of Finance (currently with the Company in another role),
Kendall Cork, a former Director of the Company, Douglas
Wright, a former Director of the Company, James Estill,
a Director of the Company and Douglas Fregin, a former
Director of the Company, relating to the previously disclosed
OSC investigation of the Company’s historical stock option
granting practices. Pursuant to the terms of the settlement
agreement with the OSC, Jim Balsillie agreed not to act as
a director of any Canadian reporting issuer until the later
of twelve months from the date of the OSC settlement and
the Company’s public disclosure of how it is addressing the
recommendations arising from the independent review. Jim
Balsillie, Mike Lazaridis and Dennis Kavelman also agreed to
contribute, in aggregate, a total of approximately CAD $83.1
million to the Company, consisting of (i) a total of CAD $38.3
million to the Company in respect of the outstanding benefit
arising from incorrectly priced stock options granted to all
employees of the Company from 1996 to 2006 and (ii) a total
of CAD $44.8 million to the Company (CAD $15.0 million of
which had previously been paid) to defray costs incurred by
the Company in the investigation and remediation of stock
option granting practices and related governance practices
at the Company. These contributions are being made
through Jim Balsillie, Mike Lazaridis and Dennis Kavelman
undertaking not to exercise vested RIM options to acquire
an aggregate of 1,160,129 common shares of the Company.
These options have a fair value equal to the aggregate
contribution amounts determined using a BSM calculation
based on the last trading day prior to the day the OSC issued
a notice of hearing in respect of the matters giving rise to
the settlement. Jim Balsillie, Mike Lazaridis, Dennis Kavelman
and Angelo Loberto also paid a total of CAD $9.1 million to
the OSC as an administrative penalty and towards the costs
of the investigation. Dennis Kavelman is also prohibited from
acting as a director or officer of any Canadian reporting
issuer until the later of (a) five years from the date of the order
approving the settlement, and (b) the date he completes
a course acceptable to the staff of the OSC regarding the
duties of directors and officers of public companies. Angelo
Loberto is also prohibited from acting as a director or officer
of any Canadian reporting issuer until he completes a course
acceptable to the staff of the OSC regarding the duties of
directors and officers of public companies.