Adaptec 2009 Annual Report Download - page 23

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Annual Report
lawsuit. The Federal Court dismissed the consolidated complaint on August 22, 2007 and gave plaintiffs leave to
amend. The Federal Court dismissed the plaintiffs’ first amended consolidated complaint on May 8, 2008 and
permitted plaintiffs leave to amend “one last time”. Defendants moved to dismiss the second amended complaint
which motions were to be heard on August 20, 2008.
On July 15, 2008, Ian Beiser, a named plaintiff in the Beiser/Barone action, filed a complaint in the
Delaware Court of Chancery, and it was served on July 18, 2008, compelling the Company to permit plaintiff to
inspect and make copies of the Company’s books and records. On August 5, 2008, the plaintiffs moved to stay
the Federal Court action pending the books and records action. The Federal Court granted the motion to stay on
August 13, 2008, which removed from the calendar the hearing on defendants’ motions to dismiss, previously
scheduled for August 20, 2008.
On February 26, 2009, the Delaware Chancery Court granted the Company’s motion to dismiss the
plaintiff’s books and records demand. This result has lifted the stay on the motion to dismiss the second amended
complaint in the Federal Court.
While the briefing on defendants’ motions was under way, the parties engaged in mediation and on
November 5, 2009 entered into a stipulation of settlement under which the parties have agreed, subject to court
approval, to resolve both the Beiser/Barone action and the Meissner action. Under the stipulation of settlement,
the Company expressly denies any wrong doing but, in the interest of settlement, agreed to adopt certain
corporate governance reforms and to maintain these and other reforms put in place while the litigation was
pending for a period of three years. The Company has agreed, subject to court approval, to pay plaintiffs’ counsel
$1.6 million in attorneys’ fees, half of which will be paid by the Company and the other half by the Company’s
insurance carrier. In light of the stipulated settlement, the parties have agreed to suspend the briefing on
defendants’ renewed motions to dismiss the Beiser/Barone action. On January 26, 2010, the Federal Court issued
an order (the “Preliminary Order”) granting preliminary approval of the settlement. The stipulation of settlement
is subject to final approval by the Federal Court, which has scheduled for hearing on April 29, 2010.
The Company has accrued costs of $800,000 to reflect its share of the attorneys’ fees to be paid to plaintiffs’
counsel pursuant to the settlement. As with the rest of the settlement, the agreement to pay attorneys’ fees and the
amount of fees to be paid remain subject to final approval by the Federal Court.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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