CalPERS and Lone Star Steakhouse & Saloon Inc., Wichita, Kan., agreed to settle a class action and derivative lawsuit calling for a potential $7.7 million to be paid by some current and former directors and an insurance carrier to the company, according to a joint announcement by the $186 billion pension fund and the company.
In its suit, CalPERS - which owns 341,050 Lone Star shares - contended the company paid too much when it purchased Coulter Enterprises Inc., a company owned by Lone Star CEO Jamie B. Coulter, said Brad Pacheco, fund spokesman. The California Public Employees' Retirement System, Sacramento, also contended the Lone Star board breached its fiduciary duty when it repriced stock options, Mr. Pacheco added.
"As part of the settlement, certain of the company's current and former directors agreed to reprice certain stock options or personally make payments to the company which, upon the exercise of the stock options, would result in additional proceeds to the company of approximately $4.7 million," the statement said. Also, National Union Fire Insurance Co., a unit of American International Group which provides directors and officers insurance for Lone Star, will pay $3 million to the company.
After CalPERS filed the suit, Lone Star implemented corporate governance reforms that helped pave the way for the settlement, including adding three independent directors to its board, eliminating its poison pill anti-takeover measure, and requiring stockholder approval to reprice employee stock options, the statement said.
The settlement is subject to court approval.
"We are pleased that Lone Star has taken actions to improve their corporate governance profile and we believe that the company's focus on good governance has resulted in substantially improved financial performance at the company," Mark Anson, CalPERS CIO, said in the statement: