In re McAfee, Inc. Derivative Litigation

Filing 126

ORDER PRELIMINARILY APPROVING DERIVATIVE SETTLEMENT AND PROVIDING FOR NOTICE. Final Approval Hearing set for 1/30/2009 09:00 AM in Courtroom 3, 5th Floor, San Jose. Signed by Judge Jeremy Fogel on 10/9/08. (jflc2, COURT STAFF) (Filed on 10/9/2008)

1 COUGHLIN STOIA GELLER

RUDMA & ROBBINS LLP
2 TRAVIS E. DOWNS III (148274) ELLEN GUSIKOFF STEWART (144892)

**E-Filed 10/9/08**

3 BENNY C. GOODMA III (211302)
655 West Broadway, Suite 1900
4 San Diego, CA 92101
Telephone: [phone] (fax)

travisd§csgr.com
6 elleng§csgr.com

ny § s 7 b-enAWgN cA.gWILLIAMS (213113) and r-.com SH
8 AELISH M. BAIG (201279)

CHRISTOPHER M. WOOD (254908)
9 100 Pine Street, Suite 2600

San Francisco, CA 94111
10 Telephone: [phone]

SCHIFFRI BARROW A Y TOPAZ & KESSLER LLP ERIC L. ZAGAR ROBIN WINCHESTER 280 King of Prussia Road

Radnor, PA 19087
Telephone: [phone]

415/288-4534 (fax)
11 swiliams§csgrr.com

abaig§csgr.com
12 cwood§csgr.com

610/667-7056 (fax) ezagar§sbtklaw.com rwinchester§sbtklaw.com

13 Co-Lead Counsel for Plaintiffs
14
15

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
) Master File No. 5:06-cv-03484-JF

16

17 In re MCAFEE, INC. DERIVATIVE LITIGATION
18

)

19 This Document Relates To: 20
21

) ) )
) ) )

---------------(PROPOSED)- ORDER PRELIMINARIL Y APPROVING DERIV A TIVE SETTLEMENT AND PROVIDING FOR NOTICE

ALL ACTIONS.

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1 WHEREAS, the paries having made application, pursuant to Federal Rule of Civil
2 Procedure 23.1, for an order (i) preliminarly approving the settlement (the "Settlement") of the
3 Federal Derivative Action, in accordance with a Stipulation of

Settlement dated September 26,2008

4 (the "Stipulation"), which, together with the Exhbits anexed thereto, sets forth the terms and
5 conditions for a proposed Settlement and dismissal of

the Federal Derivative Action with prejudice,

6 upon the terms and conditions set forth therein; and (ii) approving for distribution of

the Notice of

7 Proposed Settlement (the "Notice"); and

8 WHEREAS, all capitalized terms contained herein shall have the same meanings as set forth
9 in the Stipulation (in addition to those capitalized terms defined herein); and

10 WHEREAS, this Cour, having considered the Stipulation and the Exhibits anexed thereto
11 and having heard the arguments of the Settling Parties at the preliminar approval hearing:

12 NOW THEREFORE, IT is HEREBY ORDERED:
13 1. This Cour does hereby preliminarily approve, subject to fuher consideration at the

14 Settlement Hearing described below, the Stipulation and the Settlement set forth therein, including

15 the terms and conditions for settlement and dismissal with prejudice of the Federal Derivative

16 Action.
17 2. A hearing (the "Settlement Hearing") shall be held before this Cour on

1/30/09

9 00 18 2008, at _ :_.m.,a2112 Robert F. Peckham Federal Building and United States Courhouse, 280

19 South First Street, San Jose, California, to determine whether the Settlement of the Federal
20 Derivative Action on the terms and conditions provided for in the Stipulation is fair, reasonable and
21 adequate to McAfee shareholders and to McAfee and should be approved by the Cour; whether a
22 Judgment as provided in iri.9 of

the Stipulation should be entered herein, and to award attorneys'

23 fees and expenses to Plaintiffs' Counsel.
24 3. The Cour approves, as to form and content, the Notice anexed as Exhibit A-I
25 hereto, and finds that the distribution of

the Notice substantially in the maner and form set forth in
Federal Rule of

26 this Order, meets the requirements of

Civil Procedure 23.1 and due process, and is

27 the best notice practicable under the circumstances and shall constitute due and sufficient notice to

28 all Persons entitled thereto.
(PROP) ORD PREL APPRV DER SETTLEMENT & PROVIDING FOR NOTlCE- 5:06-cv-03484-JF - I -

1 4. Not later than ten (I

0) days following entry of

this Order, McAfee shall cause a copy

2 of

the Notice, substantially in the form anexed as Exhibit A-I hereto, to be published in the national

3 edition of Investor's Business Daily.

4 5. At least seven (7) days prior to the Settlement Hearing, McAfee's counsel shall serve

5 on counsel for the Federal Plaintiffs and fie with the Cour proof, by affdavit or declaration, of such
6 publication.

7 6. All curent McAfee shareholders shall be bound by all orders, determinations and

8 judgments in the Federal Derivative Action concernng the Settlement, whether favorable or
9 unfavorable to curent McAfee shareholders.

10 7. Pending final determination of whether the Settlement should be approved, no curent

11 McAfee shareholder, either directly, representatively, or in any other capacity, shall commence or
12 prosecute against any of the Individual Settling Defendants or McAfee, any action or proceeding in

13 any cour or tribunal asserting any of the Released Claims.
14 8. All papers in support of the Settlement and the award of attorneys' fees and expenses

15 shall be filed with the Cour and served at least seven (7) calendar days prior to the Settlement
16 Hearing.
17 9. Any current McAfee shareholder may appear and show cause, ifhe, she or it has any,
18 why the terms of the Settlement of

the Federal Derivative Action should not be approved as fair,

19 reasonable and adequate, or why a Judgment should not be entered thereon, provided, however,
20 uness otherwse ordered by the Cour, no current McAfee shareholder shall be heard or entitled to
21 contest the approval of all or any of the terms and conditions of the Settlement, or, if approved, the

22 Judgment to be entered thereon approving the same, unless that Person has, at least foureen (14)
23 days prior to the Settlement Hearing, filed with the Clerk of

the Court and served on the following

24 counsel (delivered by hand or sent by first class mail) appropriate proof of stock ownership, along

25 with written objections, including the basis therefore, and copies of any papers and briefs in support

26 thereof:
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(PROP) ORD PREL APPRV DER SETTLEMENT & PROVIDING FOR NOTlCE- 5:06-cv-03484-JF - 2 -

I

Co-Lead Counselfor Federal Plaintifs
Jeffrey D. Light COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP 655 West Broadway, Suite 1900 San Diego, CA 92101-3301
Co-Lead Counsel for State Plaintifs

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3

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5

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8

Marc M. Umeda ROBBINS UMEDA & FINK, LLP 610 West Ash Street, Suite 1800 San Diego, CA 92101
Counselfor Nominal Defendant McAfee, Inc.,

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11

and Individual Settling Defendants Eric Brown,
Robert Bucknam, Leslie Denend, Robert Dutkowsky Dale Fuller, Denis O'Leary, Robert Pangia and
Liane Wilson

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13

Rodney G. Strickland

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WILSON SONSINI GOODRICH & ROSATI, P.C. 650 Page Mil Road Palo Alto, CA 94304-1050

15 The written objections and copies of any papers and briefs in support thereof to be fied in Cour
16 shall be delivered by hand or sent by first class mail to:
17 18

Clerk of the Cour UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA 2112 Robert F. Peckham Federal Building
and United States Courhouse

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280 South First Street San Jose, CA 95113
Any current McAfee shareholder who does not make his, her or its objection in the maner provided

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herein shall be deemed to have waived such objection and shall forever be foreclosed from making
any objection to the fairness, reasonableness or adequacy of

the Settlement as incorporated in the

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Stipulation and to the award of attorneys' fees and expenses to Plaintiffs' Counsel, unless otherwse
ordered by the Cour, but shall otherwise be bound by the Judgment to be entered and the releases to
be given.

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(PROP) ORD PREL APPRV DER SETTLEMENT & PROVIDING FOR NOTlCE- 5:06-cv-03484-JF - 3 -

1

10.

Neither the Stipulation nor the Settlement, nor any act pedormed or document

2 executed pursuant to or in fuherance of the Stipulation or the Settlement: ( a) is or may be deemed

3 to be or may be offered, attempted to be offered or used in any way by the Settling Paries as a
4 presumption, a concession or an admission of, or evidence of, any fault, wrongdoing or liability of
5 the Settling Defendants or of the validity of any Released Claims; or (b) is intended by the Settling
6 Paries to be offered or received as evidence or used by any other person in any other actions or

7 proceedings, whether civil, criminal or administrative. Released Persons may file the Stipulation
8 and/or a Judgment in any action that may be brought against them in order to support a defense or
9 counterclaim based on principles of res judicata, collateral estoppel, full faith and credit, release,

10 good faith settlement, judgment bar or reduction or any other theory of claim preclusion or issue
II preclusion or similar defense or counterclaim.

12

11.

The Cour reserves the right to adjour the date of

the Settlement Hearing or modify

13 any other dates set forth herein without fuher notice to the curent McAfee shareholders, and 14 retains jurisdiction to consider all fuher applications arising out of or connected with the

15 Settlement. The Cour may approve the Settlement, with such modifications as may be agreed to by

16 the Settling Paries, if appropriate, without fuher notice to the curent McAfee shareholders.

17 IT is SO ORDERED.
18 DATED:
19

10/9/08

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21
S:\Settlement\McAfee.set\(vl) EA OOOSI47S.doc

THE HONORABLE JEREMY FOGEL UNITED STATES DISTRICT JUDGE

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(PROP) ORD PREL APPRV DER SETTLEMENT & PROVIDING FOR NOTlCE- 5:06-cv-03484-JF - 4 -

EXHIBIT A-I

1 COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP 2 TRAVIS E. DOWNS III (148274) ELLEN GUSIKOFF STEWART (144892) 3 BENNY C. GOODMAN III (211302) 655 West Broadway, Suite 1900
4 San Diego, CA 92101
Telephone: [phone] (fax)

travisd§csgr.com
6 elleng§csgr.com

7 S-HAWN A. WILLIAMS (213113) and 8 AELISH M. BAIG (201279) CHRISTOPHER M. WOOD (254908)
9 100 Pine Street, Suite 2600

bennyg§csgr.com

San Francisco, CA 94111
10 Telephone: [phone]

SCHIFFRI BARROW A Y TOPAZ & KESSLER LLP ERIC L. ZAGAR ROBIN WINCHESTER 280 King of Prussia Road

Radnor, PA 19087
Telephone: [phone]

415/288-4534 (fax)
11 swiliams§csgr.com

610/667-7056 (fax)

abaig§csgr.com
12 cwood§csgrr.com

ezagar§sbtklaw.com rwinchester§sbtklaw.com

13 Co- Lead Counsel for Plaintiffs
14
15

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
) Master File No. 5:06-cv-03484-JF

16

17 In re MCAFEE, INC. DERIATIVE
LITIGATION
18
19 This Document Relates To:

)

) NOTICE OF PROPOSED SETTLEMENT
) ) EXHIBIT A-I ) )
)

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21

ALL ACTIONS.

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25

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TO:

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3

ALL CURNT RECORD HOLDERS AN BENEFICIA OWNRS OF COMMON STOCK OF MCAFEE ("MCAFEE" OR THE "COMPAN") AS OF SEPTEMBER 26,2008, (THE "RECORD DATE") ("CURRNT MCAFEE SHAREHOLDERS").
PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. TilS
NOTICE RELATES TO A PROPOSED SETTLEMENT AND DISMISSAL OF THE

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ABOVE-CAPTIONED SHAREHOLDERS' DERIVATIVE ACTION (THE

"FEDERAL DERIVATIVE ACTION") AND A PARALLEL ACTION PENDING IN THE SUPERIOR COURT FOR THE STATE OF CALIFORNIA FOR THE COUNTY

6 7
8

OF SANTA CLAR (THE "STATE DERIVATIVE ACTION") AND CONTAINS IMPORTANT INFORMATION REGARING YOUR RIGHTS. YOUR RIGHTS MAY BE AFFECTED BY THESE LEGAL PROCEEDINGS IN THE ACTIONS. IF THE COURT APPROVES THE SETTLEMENT, YOU WILL BE FOREVER

BARRD FROM CONTESTING THE APPROVAL OF THE PROPOSED
SETTLEMENT AND FROM PURSUING THE RELEASED CLAIMS.
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11

IF YOU HOLD MCAFEE COMMON STOCK FOR THE BENEFIT OF ANOTHER, PLEASE PROMPTLY TRANSMIT THIS DOCUMENT TO SUCH BENEFICIAL OWNER.

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13

THE COURT HAS MAE NO FININGS OR DETERMNATIONS CONCERNING THE MERITS OF THE ACTION. THE RECITATION OF THE BACKGROUND AND CIRCUMSTANCES OF THE SETTLEMENT CONTAINED HEREIN DOES NOT CONSTITUTE THE FINDINGS OF THE COURT. IT IS BASED ON REPRESENTATIONS MAE TO THE COURT BY COUNSEL FOR THE PARTIES.
Notice is hereby provided to you of the proposed settlement (the "Settlement") of these

14

15 shareholder derivative lawsuits. This Notice is provided by Order ofthe United States District Cour
16 for the Northern District of

California, San Jose Division (the "Cour"). It is not an expression of
the proposed Settlement, and your rights

17 any opinion by the Cour. It is to notify you ofthe terms of

18 related thereto.

19 I. WH THE COMPANY HAS ISSUED THIS NOTICE
20 Your rights may be affected by the Settlement of the action styled In re McAfee, Inc.
21 Derivative Litigation, Master File No. 5:06-cv-03484-JF. Plaintiffs Kenneth Dossett and Heavy &
22 General Laborers' Locals 472 & 172 Pension & Anuity Funds ("Federal Plaintiffs"), Defendants

23 Eric Brown, Stephen C. Richards, Sylvia Garcia-Lechelt, Vernon Eugene Hodges, Wiliam L.
24 Larson, Dennis L. Cline, Peter R. Watkins, Prabhat K. Goyal, Robert M. Dutkowsky, Liane S.

25 Wilson, Robert W. Pangia, Denis O'Leary, Evan S. Collns, Dale L. Fuller, Virginia Gemmell,
26 Robert Bucknam, Zachar Nelson, Ar Matin, Edwin Harer and Leslie Denend ("Individual Settling

27 Defendants"), and nominal pary McAfee (McAfee and the Individual Settling Defendants
28 collectively, "Defendants"), have agreed upon terms to settle the Federal Derivative Action and a
NOTICE OF PROPOSED SETTLEMENT - 5:06-cv-03484-JF
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1 parallel action pending in the Superior Cour for the State of Californa for the County of Santa Clara
2 (the "State Derivative Action") and have signed a wrtten Stipulation of

Settlement ("Stipulation")

3 setting forth those settlement terms.

4 On ,2008, at _ _.m., the Cour will hold a hearing (the "Final Hearing") in
5 the Federal Derivative Action. The purose of

the Final Hearng is to determine: (i) whether the

6 terms of

the Settlement are fair, reasonable and adequate and should be approved; (ii) whether a final

7 judgment should be entered; and (iii) such other matters as may be necessar or proper under the
8 circumstances.

9 II. SUMMARY OF THE ACTIONS

lOOn May 31, 2006, plaintiff Kenneth Dossett fied a complaint in the United States District
II Cour for the Northern District of Californa: Dossett v. Cline, et al., Case No.5 :06-CV -03484-JF.
12 On June 7, 2006, Heavy & General Laborers' Locals 472 & 172 Pension & Annuity Funds v.
13 Samenuk, et al., Case No. C-5:06-03620-JF was filed in the same Cour. The two complaints were
14 consolidated by Order dated July 13,2006, as In re McAfee, Inc. Derivative Litigation, Case No. C-

15 5:06-CV-03484-JF (RS) (the "Federal Derivative Action"). In the same order, Heavy & General

16 Laborers' Locals 472 & 172 Pension & Anuity Funds and Kenneth Dossett were appointed lead
17 plaintiffs, and Co-Lead Counsel were appointed.
18 On and after June 2, 2006, three shareholder derivative actions were fied in the Superior

19 Cour of the State of California for the County of Santa Clara and were consolidated as In re
20 McAfee, Inc. Derivative Litigation, No. 1 :06-CV -064854 (the "State Derivative Action").
21 Both the Federal Derivative Action and the State Derivative Action (collectively herein, the
22 "Actions") allege claims on behalf of

McAfee against certain curent and former McAfee officers

23 and directors, arising from or relating to the granting of stock options at the Company between 1996
24 and 2006.
25 On July 27,2006, McAfee anounced that the Special Committee of

independent directors

26 that had been engaged in an internal review of its stock option practices and related accounting had

27 concluded that, pursuant to the requirements of Accounting Principles Board Opinion No. 25,

28 Accounting for Stock Issued to Employees (APB 25), the accounting measurement dates for certin
NOTICE OF PROPOSED SETTLEMENT - 5:06-cv-03484-JF

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1 stock options granted differed from the measurement dates previously used for such awards. The

2 Company reported that as a result, new accounting measurement dates would be applied to the
3 affected option grants.

4 On September 28, 2006, and December 8, 2006, respectively, Federal Plaintiffs fied a
5 Corrected Consolidated Verified Shareholder Derivative Complaint ("Consolidated Complaint") and

6 a First Amended Consolidated Verified Derivative Shareholder Derivative Complaint.

7 On Januar 22, 2007, McAfee moved to dismiss the Federal Derivative Action. In the
8 motion, McAfee argued, among other things, that the Federal Plaintiffs lacked standing to pursue
9 McAfee's claims because they had neither adequately alleged facts suffcient to excuse demand nor
10 adequately alleged that plaintiffs had made a demand on the McAfee Board prior to filing the

11 lawsuit.

12 On Januar 23, 2007, counsel for the Federal Plaintiffs and counsel for nominal pary
13 McAfee met to begin discussions of a possible resolution of

the Federal Derivative Action. Between

14 February 2007 and December 2007, Federal Plaintiffs and McAfee engaged in extensive ar's15 length negotiation over the terms of a resolution including corporate governance reform measures to
16 be adopted by the Company as par of any resolution of

the Federal Derivative Action.

17 On October 9, 2007, pursuant to a Stipulation and Order, the Federal Derivative Action was
18 stayed pending a mediation scheduled for December II, 2007, before the United States District

19 Judge Layn R. Philips (Ret.).

20 On October 10,2007, counsel for the Federal Plaintiffs met with counsel for McAfee and

21 counsel for the McAfee Special Committee, Howrey LLP, and engaged in extensive discussions
22 concerning the Special Committee's investigation in fuherance of

their settlement negotiations.

23 Between October 10,2007 and November 29,2007, counsel for the Federal Plaintiffs and

24 Howrey LLP engaged in the exchange of information in fuherance of settlement discussions.

25 On December 11, 2007, representatives of all paries to the Actions, including the Non26 Settling Defendants George Samenuk ("Samenuk"), Kent Roberts ("Roberts") and Kevin M. Weiss

27 ("Weiss"), engaged in a formal mediation before Judge Philips. Following that mediation, and afer
28 additional negotiations among the Federal Plaintiffs, State Plaintiffs, McAfee and the Individual
NOTICE OF PROPOSED SETTLEMENT - 5:06-cv-03484-JF

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1 Settling Defendants, the Settling Paries reached an agreement-in-principle for the resolution of

the

2 Actions, as set forth in a Memorandum of Understanding, executed by the Settling Paries on

3 Februar 22, 2008.
4 All Settling Paries to the Actions have agreed to a resolution of the claims asserted therein

5 and any and all claims which could have been asserted therein, as set forth in the Stipulation. All

6 Settling Paries and their counsel concur that the Settlement described in the Stipulation is fair to

7 McAfee and to Curent McAfee Shareholders.
8 III. TERMS OF THE PROPOSED DERIVATIVE SETTLEMENT
9 The principal terms, conditions and other matters that are par of the Settlement, which is

10 subject to approval by the Cour, are sumarized below. This sumar should be read in
II conjunction with, and is qualified in its entirety by reference to, the text ofthe Stipulation, which has

12 been fied with the Cour.
13 To resolve the Actions, and solely as a result of

them, the Settling Paries agreed as set forth

14 in the Stipulation as follows:
15 1. The Settling Defendants acknowledge that the filing and the prosecution of the

16 Actions was a material factor in the payments to the Company described below and the corporate
17 governance enhancements adopted and/or implemented as sumarzed below and the fully described
18 in the Stipulation. The Settling Defendants acknowledge that such payments and corporate

19 governance enhancements confer a substantial benefit to McAfee.

20 (a) Payments to the Company.
21 (i) Moneta Relief

Resulting from Plaitiffs' Allegations: Subsequent to

22 the filing ofthe Consolidated Complaint in the Federal Derivative Action, and the Complaint in the

23 State Derivative Action, McAfee froze option exercises from certain option recipients, including
24 1,235,000 stock options held by defendant Samenuk and 494,792 options held by defendant Weiss,

25 which defendants Samenuk and Weiss were not allowed to exercise before the options expired. The
26 Board decided not to extend the exercise period of

the options beyond the date that the option freeze

27 was lifted or to renew the option agreements after they had expired. Therefore, 1,729,792 options

28 with an intrinsic value of approximately $30 millon were effectively cancelled.
NOTICE OF PROPOSED SETTLEMENT - 5:06-cv-03484-JF

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1 (ii) This freeze also resulted in the effective cancellation of vested
2 unexercised options and unpaid amounts to Settling Defendant Sylvia Garcia-Lechelt. The

3 Company agrees and acknowledges that the Federal Derivative Action was a material factor in the
4 cancellation of options and resulting forfeitue of the unpaid amounts.

5 (b) Corporate Governance Reforms. McAfee and the Federal Plaintiffs have
6 conducted extensive, ar's-length negotiations and have reached agreement regarding varous

7 corporate governance issues, including internal controls and procedures at the Company, which
8 include internal controls and procedures that relate to certain of

the allegations raised in the Actions.

9 Specifically, these reforms include executive compensation policies and procedures, including with

10 respect to stock option plans and agreements; policies and procedures for the futue granting of stock

11 option awards, including the timing of such grants and those given responsibilty therefor;
12 nomination procedures for shareholder-nominated directors to the Board; director independence
13 stadards; director stock ownership; the circumstances under which the establishment of

the Lead

14 Independent Director is necessar, and the responsibilities of such director; accounting practices and

15 procedures; the requirement of a CFO Quarerly Financial Review; internal audit fuctions; revenue

16 recognition and other accounting policies; insider trading controls; a policy regarding forfeitue of

17 bonuses and profits from stock sales; corporate ethics, honesty and legal compliance; shareholder
18 proposals; and attendance at shareholder meetings. McAfee and Individual Settling Defendants
19 acknowledge that the Actions were a material factor in the monetary payment to the Company and
20 adoption and/or implementation of

the Corporate Governance Reforms set forth in the Stipulation,

21 and as such confer a benefit to McAfee.
22 2. The Stipulation also provides for the entry of judgment dismissing the Federal

23 Derivative Action against McAfee and the Individual Settling Defendants with prejudice and, as

24 explained in more detail in the Stipulation, baring and releasing certain known or unown claims
25 that have been or could have been brought in any cour by the plaintiffs in the Actions or by

26 McAfee, or any of its shareholders, against McAfee and the Individual Settling Defendants relating
27 to any of the claims or matters that were or could have been alleged or asserted in any of the

28 pleadings or papers filed in the Actions. The Stipulation fuher provides that the entry of judgment
NOTICE OF PROPOSED SETTLEMENT - 5:06-cv-03484-JF

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1 will bar and release any known or unown claims that have been or could have been brought in any
2 cour by the Settling Defendants against plaintiffs or Plaintiffs' Counsel related to any of the claims
3 or matters that were or could have been alleged or asserted in any of

the pleadings or papers fied in

4 the Actions or based upon or arsing out of the institution, prosecution, assertion, settlement, or
5 resolution of

the Actions. In addition, after the Effective Date (as defined in the Stipulation) the

6 State Derivative Action will be dismissed with prejudice.

7 iv. PLAINTIFFS' ATTORNEYS' FEES AND EXPENSES
8 After negotiating the material terms ofthe Settlement, plaintiffs and the Company, with the
9 assistace of

the mediator, the Honorable Layn R. Phillps (Ret.), negotiated the attorneys' fees that

10 McAfee would pay to Plaintiffs' Counsel, subject to Cour approvaL. As a result of these
11 negotiations, and in light ofthe substantial benefit conferred, McAfee has agreed to pay $13,750,000

12 to Plaintiffs' Counsel for their fees and expenses ("Fee Award"). The Fee Award includes fees and
13 expenses incured by Plaintiffs' Counsel in connection with the prosecution and settlement of the

14 Actions. To date, Plaintiffs' Counsel have not received any payments for their efforts on behalf of
15 McAfee shareholders. The Fee Award will compensate Plaintiffs' Counsel for

the results achieved

16 in the Actions.

17 V. REASONS FOR THE SETTLEMENT
18 Counsel for the Settling Paries believe that the Settlement is in the best interests of the
19 Settling Paries to the Federal Derivative Action and the State Derivative Action, McAfee, and

20 Curent McAfee Shareholders.

21 A. Why Did Plaintiffs Agree to Settle?
22 Plaintiffs' Counsel conducted an extensive investigation relating to the claims and the
23 underlying events and transactions alleged in the Actions. Plaintiffs' Counsel have analyzed the
24 evidence adduced during their investigation, and have researched the applicable law with respect to

25 the claims of plaintiffs, Curent McAfee Shareholders and McAfee against the Defendants and the

26 potential defenses thereto.
27 Based upon their investigation as set forth above, plaintiffs and their counsel have concluded
28 that the terms and conditions of the Stipulation are fair, reasonable and adequate to plaintiffs,
NOTICE OF PROPOSED SETTLEMENT - 5:06-cv-03484-JF

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1 Curent McAfee Shareholders, and McAfee, and in their best interests, and have agreed to settle the
2 claims raised in the Actions pursuant to the terms and provisions of

the Stipulation afer considering,

3 among other things: (a) the substatial benefits that Curent McAfee Shareholders and McAfee have

4 received or will receive from the Settlement, (b) the attendant risks of continued litigation of the
5 Actions, ( c) actions taken by the Company and its Board of Directors in response to alleged options

6 dating issues at McAfee, and (d) the desirability of permitting the Settlement to be consumated.

7 In particular, plaintiffs and their counsel considered the significant litigation risk inherent in
8 these shareholder derivative Actions. The law imposes significant burdens on plaintiffs for pleading

9 and proving a shareholder derivative claim. Whle plaintiffs believe their claims are meritorious,

10 plaintiffs acknowledge that there is a substantial risk that the Actions may not succeed in producing
II a recovery in light of the applicable legal stadards and possible defenses. Plaintiffs and their

12 counsel believe that, under the circumstances, they have obtained the best possible relief for McAfee

13 and Curent McAfee Shareholders.

14 B. Why Did the Settling Defendants Agree to Settle?
15 The Settling Defendants have strenuously denied, and continue strenuously to deny each and
16 every allegation of liabilty made against them or that could have been made against them in the
17 Actions, and assert that they have meritorious defenses to those claims and that judgment should be

18 entered dismissing all claims against them with prejudice. The Settling Defendants have thus
19 entered into the Stipulation solely to avoid the continuing additional expense, inconvenience, and

20 distraction of this burdensome litigation and to avoid the risks inherent in any lawsuit, and without

21 admitting any wrongdoing or liabilty whatsoever.

22 VI. FINAL HEARNG

23 On , 2008, at _.m., the Cour wil hold the Final Hearing at
24 2112 Robert F. Peckham Federal Building and United States Courhouse, 280 South First Street, San
25 Jose, Californa. At the Final Hearng, the Cour wil consider whether the terms of

the Settlement

26 are fair, reasonable and adequate and thus should be finally approved and whether the Federal
27 Action should be dismissed with prejudice pursuant to the Stipulation.
28
NOTICE OF PROPOSED SETTLEMENT - 5 :06-cv-03484-JF
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1 VII. RIGHT TO ATTEND FINAL HEARING
2 Any Curent McAfee Shareholder may, but is not required to, appear in person at the Final

3 Hearing. If you want to be heard at the Final Hearing, then you must first comply with the
4 procedures for objecting, which are set forth below. The Cour has the right to change the hearing
5 dates or times without fuer notice. Thus, if you are planng to attend the Final Hearing, you

6 should confrm the date and time before going to the Cour. CURRNT MCAFEE
7 SHAREHOLDERS WHO HA VE NO OBJECTION TO THE SETTLEMENT DO NOT NEED
8 TO APPEAR AT THE FINAL HEARING OR TAKE AN OTHER ACTION.

9 VIII. RIGHT TO OBJECT TO THE SETTLEMENT AND PROCEDURES FOR DOING SO
10
You have the right to object to any aspect of

the Settlement. You must object in writing, and

11

you may request to be heard at the Final Hearing. If you choose to object, then you must follow
12

these procedures.
13

A. You Must Make Detailed Objections in Writing
14

Any objections must be presented in writing and must contain the following information:
15
1. Your name, legal address, and telephone number;

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2. Proof of being a Curent McAfee Shareholder as of

the Record Date;

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3. The date(s) you acquired your McAfee shares;

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4. A statement of your position with respect to the matters to be heard at the Final
19

Hearing, including a statement of each objection being made;
20
5.
21

The grounds for each objection or the reasons for your desiring to appear and to be

heard;
22
6.
Notice of

whether you intend to appear at the Final Hearing (this is not required if

23

you have lodged your objection with the Cour); and

24
7. Copies of any papers you intend to submit to the Cour, along with the names of any

25
witness(es) you intend to call to testify at the Final Hearing and the subject(s) of

their testimony.

26

8. The Cour may not consider any objection that does not substatially comply with
27

these requirements.
28
NOTICE OF PROPOSED SETTLEMENT - 5:06-cv-03484-JF

-8-

1

B.

You Must Timely Deliver Written Objections to the Court, Plaintiffs' Counsel, and Settlng Defendants' Counsel

2

YOUR WRTTEN OBJECTIONS MUST BE ON FILE WITH THE CLERK OF THE
3

COURT NO LATER THAN
4

,2008. The Cour Clerk's address is:

Clerk of the Cour
5

6

United States District Cour Northern District of Californa 2112 Robert F. Peckham Federal Building
and United States Courouse

7
8

280 South First Street San Jose, CA 95113

YOU ALSO MUST DELIVER COPIES OF THE MATERIALS TO PLAINTIFFS'
9

COUNSEL AND COUNSEL FOR SETTLING DEFENDANTS SO THEY ARE RECEIVED NO
10

LATER THAN
11

,2008. Counsel's addresses are:

12

Co-Lead Counselfor Federal Plaintifs
13

14
15

Jeffrey D. Light COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP 655 West Broadway, Suite 1900 San Diego, CA 92101-3301
Co-Lead Counsel for State Plaintifs

16
17
18

19

Marc M. Umeda ROBBINS UMEDA & FINK, LLP 61 0 West Ash Street, Suite 1800 San Diego, CA 92101
Counselfor Nominal Defendant McAfee, Inc.,

20
21

and Individual Settling Defendants Eric Brown,
22
23

Robert Bucknam, Leslie Denend, Robert Dutkowsky Dale Fuller, Denis O'Leary, Robert Pangia and
Liane Wilson

Rodney G. Strickland

24
25

WILSON SONSINI GOODRICH & ROSATI, P.C. 650 Page Mil Road Palo Alto, CA 94304-1050
Unless the Cour orders otherwse, your objection wil not be considered uness it is timely filed with

26

27
28

the Cour and delivered to Plaintiffs' Counsel and counsel for Settling Defendants.

NOTICE OF PROPOSED SETTLEMENT - 5:06-cv-03484-JF

- 9-

1 Any Person or entity who fails to object or otherwse request to be heard in the maner
2 prescribed above will be deemed to have waived the right to object to any aspect of

the Settlement or

3 otherwise request to be heard (including the right to appeal) and wil be forever bared from raising
4 such objection or request to be heard in this or any other action or proceeding.

5 ix. HOW TO OBTAIN ADDITIONAL INFORMATION
6 This Notice sumarizes the Stipulation. It is not a complete statement of the events of

the

7 Actions or the Stipulation.
8 You may inspect the Stipulation and other papers in the Federal Action at the United States
9 District Clerk's offce at any time during regular business hours of each business day. The Clerk's
10 office is located at the United States District for the Northern District of

California, 2112 Robert F.

11 Peckham Federal Building and United States Courhouse, 280 South First Street, San Jose,
12 Californa. However, you must appear in person to inspect these documents. The Clerk's offce will
13 not mail copies to you.

14 PLEASE DO NOT CALL, WRTE, OR OTHERWISE DIRCT QUESTIONS TO EITHER
15 THE COURT OR THE CLERK'S OFFICE. Any questions you have about matters in this Notice

16 should be directed by telephone to 619/231-1058 or in writing to Rick Nelson, Shareholder
17 Relations, Coughlin Stoia Geller Rudman & Robbins LLP, 655 West Broadway, Suite 1900, San
18 Diego, CA 92101.

19 DATED
20
21

, 2008

BY ORDER OF THE COURT UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION

22
S:\Settlement\McAfee.set\(v3) Al NOT SETTLEMENT 00053769.doc

23

24
25

26 27
28
NOTICE OF PROPOSED SETTLEMENT - 5:06-cv-03484-JF

- 10-

EXHIBIT A-2

1 COUGHLIN STOIA GELLER

RUDMA & ROBBINS LLP
2 TRAVIS E. DOWNS III (148274) ELLEN GUSIKOFF STEWART (144892)

3 BENNY C. GOODMA III (211302)
655 West Broadway, Suite 1900
4 San Diego, CA 92101
Telephone: [phone] (fax)

travisd§csgr.com
6 elleng§csgr.com

7 S-HAWN A. WILLIAMS (213113) and 8 AELISH M. BAIG (201279) CHRISTOPHER M. WOOD (254908)
9 100 Pine Street, Suite 2600

bennyg§csgr.com

SCHIFFRI BARROW A Y TOPAZ & KESSLER LLP ERIC L. ZAGAR ROBIN WINCHESTER
280 King of

San Francisco, CA 94111
10 Telephone: [phone]

Prussia Road

Radnor, PA 19087
Telephone: [phone]

415/288-4534 (fax)
11 swiliams§csgrr.com

610/667-7056 (fax)

abaig§csgrr.com
12 cwood§csgr.com

ezagar§sbtklaw.com rwnchester§sbtklaw.com

13 Co- Lead Counsel for Plaintiffs
14
15

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
) Master File No. 5:06-cv-03484-JF

16

17 In re MCAFEE, INC. DERIATIVE
LITIGATION
18
19 This Document Relates To:

)

) SUMMARY NOTICE OF SETTLEMENT
) ) EXHIBIT A-2 )
) )

20
21

ALL ACTIONS.

22
23

24
25

26 27 28

1 NOTICE OF SETTLEMENT OF DERIVATIVE ACTIONS
2 TO: ALL CURRNT SHAREHOLDERS OF MCAFEE, INC. ("MCAFEE" OR THE
"COMPANY") COMMON STOCK AS OF SEPTEMBER 26, 2008
3

PLEASE TAK NOTICE that the above-captioned shareholder derivative action, as well as
4
the consolidated action in Santa Clara County Superior Cour identified by Lead Case I :06-CV5

064854 (the "Actions"), are being settled and the paries have entered into a Stipulation of
6
Settlement dated September 26,2008 (the "Stipulation"). The terms of

the Settlement set forth in

7

the Stipulation include: (i) a direct financial benefit to McAfee with an intrinsic value of
8

approximately $30 milion, based on the freeze and effective cancellation of approximately
9

1,729,792 vested, in-the-money options held by certain defendants; (ii) the adoption and/or
10

implementation of a variety of corporate governance measures, including measures that relate to and
11

address many ofthe underlying issues in the Actions, including, but not limited to, enhanced director
12
independence standards, shareholder paricipation in the nomination process of independent directors
13

to the Board; a Company-sponsored resolution callng for declassification ofthe McAfee Board; the
14
adoption of majority voting for directors, officer and director compensation,

and stock option

15

16
17

granting procedures; (iii) the assignment to McAfee of certain claims against defendants George

Samenuk, Kent Roberts and Kevin M. Weiss which will not be released and may be pursued by
McAfee, and thus may yield fuher value for the Company; (iv) McAfee's payment of

Plaintiffs'

18

Counsel's attorney fees and expenses in the amount of$13.75 milion.
19

IF YOU AR A CURRNT OWNER OF MCAFEE COMMON STOCK, YOUR RIGHTS
20

MAY BE AFFECTED BY PROCEEDINGS IN THE LITIGATION.
21

On
22
23

,2008, at __.m., a hearing (the "Settlement Hearing") wil be held before

the United States District Cour for the Northern District of

California, 2112 Robert F. Peckham

Federal Building and United States Courhouse, 280 South First Street, San Jose, CA 95113, to
24

determine: (1) whether the terms of the Settlement should be approved as fair, reasonable and
25

adequate; and (2) whether the above-entitled action should be dismissed on the merits and with
26

prejudice.
27
28
SUMRY NOTICE OF SETTLEMENT- 5:06-cv-03484-JF

-1-

1 Any shareholder of

McAfee that objects to the Settlement of the Actions shall have a right to

2 appear and to be heard at the Settlement Hearng, provided that he or she was a shareholder of record
3 as of September 26,2008. Any shareholder of

McAfee who satisfies this requirement may enter an

4 appearance through counsel of such member's own choosing and at such member's own expense or

5 may appear on their own. However, no shareholder of McAfee shall be heard at the Settlement

6 Hearing unless no later than 14 days prior to the date of the Settlement Hearing, such shareholder
7 has fied with the Cour and delivered to plaintiffs' counsel, counsel for nominal defendant McAfee
8 and certain Individual Settling Defendants, a written notice of objection, their ground for opposing
9 the Settlement, and proof of both their status as a shareholder and the dates of stock ownership in

10 McAfee. Only shareholders who have fied and delivered valid and timely wrtten notices of
II objection wil be entitled to be heard at the Settlement Hearing uness the Cour orders otherwise.

12 If you wish to object to the Settlement, you must fie a written objection setting forth the
13 grounds for such an objection with the Cour on or before
14
15

, with service on the following

paries:
Co-Lead Counselfor Federal Plaintifs

16 17
18

Jeffrey D. Light COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP 655 West Broadway, Suite 1900 San Diego, CA 92101-3301
Co-Lead Counsel for State Plaintifs

19

20
21

22
23

Marc M. Umeda ROBBINS UMEDA & FINK, LLP 61 0 West Ash Street, Suite 1800 San Diego, CA 92101

24
25

Counsel for Nominal Defendant McAfee, Inc., and Certain Individual Settling Defendants
Rodney G. Strickland WILSON SONSINI GOODRICH & ROSATI, P.C. 650 Page Mil Road Palo Alto, CA 94304-1050

26

27
28

SUMMARY NOTICE OF SETTLEMENT- 5:06-cv-03484-JF

- 2-

1 Inquiries, other than requests for the detailed form of notice, may be made to Plaintiffs'

2 Counsel: Rick Nelson, clo Shareholder Relations, Coughlin Stoia Geller Rudman & Robbins LLP,

3 655 West Broadway, Suite 1900, San Diego, CA 92101; phone [phone].

4

DATED
5

,2008

6 7
8
S:\Settlement\McAfee.set\(v3) A2 NOT SUMMY 00051 777.doc

BY ORDER OF THE COURT UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION

9
10
11

12
13

14
15

16 17
18 19

20
21

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25

26

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SUMMARY NOTICE OF SETTLEMENT- 5:06-cv-03484-JF

-3-