Raytheon 2004 Annual Report Download - page 43

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additional former or present officers were named as defendants in a Consolidated and Amended Class Action
Complaint (the “Consolidated Complaint”) with the caption, In re: Raytheon Securities Litigation (Civil Action No.
12142-PBS), filed in the U.S. District Court in Massachusetts. The Consolidated Complaint principally alleged that
the defendants violated federal securities laws by purportedly making misleading statements and by failing to
disclose material information concerning the Company’s financial performance during the class period. In March
2002, the court certified the class of plaintiffs as those people who purchased Raytheon stock between October 7,
1998 through October 12, 1999. On March 17, 2003 the named plaintiff filed a Second Consolidated and Amended
Complaint which did not change the claims against the Company or the individual defendants, but which added
the Company’s independent registered public accounting firm as an additional defendant. Without admitting any
liability or wrongdoing, in May 2004, the Company reached an agreement to settle this class action lawsuit on
behalf of the Company and all individual defendants. The terms of the settlement included a cash payment of $210
million and the issuance of warrants for the Company’s stock with a stipulated value of $200 million. The warrants
will have a five-year term with a strike price of $37.50 and will be issued when the settlement proceeds are
distributed to the claimants. On December 6, 2004, the Court issued an Order granting Final Approval of the
settlement and, on December 10, 2004, Final Judgment was entered resolving all claims asserted against the
Company and the individual defendants. In May 2004, the Company’s independent registered public accounting
firm reached a settlement with the plaintiff, which was also approved on December 6, 2004. In connection with the
settlement, the Company recorded a charge of $329 million, of which $325 million was included in other expense, a
$410 million accrued expense, and an $85 million receivable for insurance proceeds primarily related to this
settlement. The charge for the settlement will be revised in future quarters to reflect changes in the fair value of the
warrants after they are issued.
As previously reported, the Company also was named as a nominal defendant and all of its directors at the time
(except one) were named as defendants in purported derivative lawsuits filed on October 25, 1999 in the Court of
Chancery of the State of Delaware in and for New Castle County by Ralph Mirarchi and others (No. 17495- NC),
and on November 24, 1999 in Middlesex County, Massachusetts, Superior Court by John Chevedden (No. 99-
5782). On February 28, 2000, Mr. Chevedden filed another derivative action in the Delaware Chancery Court
entitled John Chevedden v. Daniel P. Burnham, et al., (No. 17838- NC) and on March 22, 2000, Mr. Chevedden’s
Massachusetts derivative action was dismissed. The Mirarchi and Chevedden derivative complaints contain
allegations similar to those included in the Consolidated Complaint in the In Re Raytheon Securities Litigation, and
further allege that the defendants purportedly breached fiduciary duties to the Company and allegedly failed to
exercise due care and diligence in the management and administration of the affairs of the Company. The court has
consolidated the Mirachi and Chevedden actions, and plaintiffs have filed a Consolidated Amended Complaint
under the caption In re Raytheon Derivative Litigation (No. 17495-NC). On April 25, 2003, the defendants filed a
motion to dismiss the Consolidated Amended Complaint. Without admitting any liability or wrongdoing, in July
2004, the Company and the individual defendants reached a tentative agreement to settle this derivative action. The
settlement, which is subject to court approval, will resolve all claims in the case and is not expected to have a
material effect on the Company’s financial position or results of operations.
As previously reported, in June 2001, a class action lawsuit entitled, Muzinich & Co., Inc. et al v. Raytheon
Company, et. al., (Civil Action No. 01-0284-S-BLW) was filed in federal court in Boise, Idaho allegedly on behalf of
all purchasers of common stock or senior notes of Washington Group International, Inc. (“WGI”) during the
period April 17, 2000 through March 1, 2001 (the class period). The plaintiff class claims to have suffered harm by
purchasing WGI securities because the Company and certain of its officers allegedly violated federal securities laws
by purportedly misrepresenting the true financial condition of RE&C in order to sell RE&C to WGI at an artificially
inflated price. An amended complaint was filed on October 1, 2001 alleging similar claims. The Company and the
individual defendants filed a motion seeking to dismiss the action in mid-November 2001. On April 30, 2002, the