Business lesson of the week: If you're running a super successful start-up company poised for huge growth, don't back date your stock options! Learn from the members of RIM's exec team that just settled with the Ontario Securities Commission... not only does it not look so good to your shareholders and fans, but it'll cost you. In this case, the cost is to the tune of $90 Million. The $90 Million is broken down into fines, payback to the company, and payback to cover the cost of the investigation. You can read the details in RIM's press release (after the jump) and you may want to check out this Reuter's article that follows up with more details.
Most hard hit in the settlement is RIM's Co-CEO Jim Balsillie, who gets the biggest chunk of the fine portion ($5 million) and as part of the deal will be stepping down from RIM's Board of Directors for a minimum of a year. D'oh!
Press Release
RIM Announces Approval of Settlement Agreement with OSC
WATERLOO, ONTARIO--(Marketwire - Feb. 5, 2009) - Research In Motion Limited ("RIM" or the "Company") (NASDAQ:RIMM)(TSX:RIM) announced today that a panel of Commissioners of the Ontario Securities Commission (the "OSC") has approved a settlement agreement with RIM, Jim Balsillie, Mike Lazaridis, Dennis Kavelman, Angelo Loberto, Kendall Cork, Douglas Wright, James Estill and Douglas Fregin, relating to the previously disclosed investigation of RIM's historical stock option granting practices that followed the management-initiated, voluntary review commenced in 2006.
Pursuant to the terms of the settlement agreement with the OSC, which contains a statement of facts that has been agreed to by the parties only for the purposes of the OSC proceedings, RIM has agreed to submit to a review of its governance practices and procedures by an independent person selected by the OSC and paid for by RIM. Mr. Balsillie has 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 RIM's public disclosure of how it is addressing the recommendations arising from the independent review. Messrs. Balsillie, Lazaridis, Kavelman and Loberto have also agreed to contribute, in aggregate, a total of approximately C$92 million, consisting of (i) a total of C$38.3 million to RIM in respect of the outstanding benefit arising from incorrectly priced stock options granted to all RIM employees from 1996 to 2006, (ii) a total of C$44.8 million to RIM (C$15 million of which has previously been paid) to defray costs incurred by RIM in the investigation and remediation of stock options, granting practices and related governance practices at RIM, and (iii) a total of C$9.1 million to the OSC as an administrative penalty and towards the costs of the OSC's investigation. Mr. 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 OSC's 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. Mr. 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. The settlement agreement will be available on the OSC's website at www.osc.gov.on.ca
RIM also announced that it has made an offer of settlement to the United States Securities and Exchange Commission (the "SEC") to resolve the SEC's separate investigation of RIM's historical stock option granting practices. RIM has been informed that Messrs. Balsillie, Lazaridis, Kavelman and Loberto have similarly made offers of settlement. The proposed settlements are subject to approval by the Commissioners of the SEC. The staff of the SEC's Division of Enforcement ("SEC Staff") has agreed to recommend that the Commissioners approve the proposed settlements; however, the Commissioners have broad discretion, and there can be no assurance that the Commissioners will approve the settlements presented to them by the SEC Staff. If the offered settlements are approved, RIM does not anticipate that the settlements would have a material adverse effect on the Company or its business or operations.
John Richardson, RIM's Lead Director stated "RIM is pleased that the parties have resolved matters with the OSC and looks forward to resolving matters with the SEC. While RIM and its directors and officers regret the occurrence of the matters described in the OSC settlement agreement, we believe the actions taken by RIM's board of directors and management since the conclusion of the Company's internal review in March 2007 have further strengthened the Company and we are confident that RIM is continuing to move forward with strong leadership and a passion for innovation, growth and operational excellence."
About Research In Motion (RIM)
Research In Motion is a leading designer, manufacturer and marketer of innovative wireless solutions for the worldwide mobile communications market. Through the development of integrated hardware, software and services that support multiple wireless network standards, RIM provides platforms and solutions for seamless access to time-sensitive information including email, phone, SMS messaging, Internet and intranet-based applications. RIM's portfolio of award-winning products, services and embedded technologies are used by thousands of organizations around the world and include the BlackBerry(R) wireless platform, the RIM Wireless Handheld(TM) product line, software development tools, radio-modems and software/hardware licensing agreements. Founded in 1984 and based in Waterloo, Ontario, RIM operates offices in North America, Europe and Asia Pacific. RIM is listed on the Nasdaq Stock Market (NASDAQ:RIMM) and the Toronto Stock Exchange (TSX:RIM). For more information, visit www.rim.com or www.BlackBerry.com.
