Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_06-cv-05503/USCOURTS-cand-3_06-cv-05503-22/pdf.json

Nature of Suit Code: 160
Nature of Suit: Stockholder's Suits
Cause of Action: 28:1331 Fed. Question

---

United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

IN RE ZORAN CORPORATION

DERIVATIVE LITIGATION

______________________________________

This document relates to: 

All Actions

 /

No. C 06-05503 WHA

FURTHER REQUEST FOR

INFORMATION

Counsel for both sides should address the following issues in a submission by MARCH

21, 2008, AT NOON: 

- As a result of the hearing on the motion for preliminary approval and the

submissions submitted thereto, the Court was under the impression that the

options repriced as part of the settlement were repriced in December 2007 or

thereafter. The Court was surprised to learn in reviewing the supplemental

submissions by counsel that the repriced options were actually repriced in

December 2006 — even before the case was allowed to go forward under Rule

12. Please explain where, if at all, in the submissions made before the hearing

on the preliminary, i.e., March 3, 2008, or in the transcript of the preliminary

hearing of approval that either side indicated that the repriced options had

actually been repriced well over a year ago. 

Case 3:06-cv-05503-WHA Document 153 Filed 03/19/08 Page 1 of 3
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

- Is there any authority, pro or con, on whether past ameliorative conduct adopted

by a company which has already occurred can count as consideration for a Rule

23.1 settlement over a year later?

- For both plaintiff and defendant’s Black-Scholes analysis, please explain exactly

what inputs were used for each valuation date, i.e., 12/3/07, 2/26/08, 3/3/08, how

these inputs were obtained, why these inputs are the correct inputs, and why the

results for plaintiff’s analysis differ from defendants’. 

- From the plaintiff’s motion for preliminary approval (Dkt. 128) and the

stipulation of settlement, it appeared that the Black-Scholes method was used to

value both the canceled options and the repriced options. From the supplemental

responses, however, the Court has learned that only the canceled options were

valued using the Black-Scholes method and the repriced options were valued

using a so-called “intrinsic value” method. Plaintiff’s expert Chris Johnson

chose to value both the repriced options and the canceled options using the

Black-Scholes method. Please explain where in the submissions made before the

hearing for preliminary approval, i.e., March 3, 2008, or at the hearing that

counsel indicated that only the canceled options were valued using the BlackScholes method. Why was the Black-Scholes method not used in valuing the

repriced options?

- Please provide a copy of the memorandum of understanding. The submission by

the parties should indicate when the MOU was actually signed by all parties.

- Have any of the corporate governance remedial measures established as part of

the settlement agreement already been adopted by Zoran? If so, when were they

adopted?

- At the hearing on the motion for preliminary approval, the parties represented

that the special committee found that $6.2 million in options that should have

been repriced had actually been exercised. Of this $6.2 million, $1.65 million

had been exercised by the individual defendants. Accordingly, as counsel put it,

Case 3:06-cv-05503-WHA Document 153 Filed 03/19/08 Page 2 of 3
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

the $1.65 million being returned to the company “represented 100% of the

personal benefit that the individual defendants derived.” Please explain how this

$1.65 million fits in with plaintiff’s expert damage report, which seems to

attribute only $1.35 million in damages to the individual defendants.

- Is it correct that all allegedly backdated options have been repriced by the

company except those which have already been exercised?

Dated: March 19, 2008. 

WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

Case 3:06-cv-05503-WHA Document 153 Filed 03/19/08 Page 3 of 3