3Ware 2003 Annual Report Download - page 73

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APPLIED MICRO CIRCUITS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Deferred Compensation
The Company recorded acquisition-related purchase consideration of $438.8 million as deferred stock-based
compensation. This amount represents the portion of the purchase consideration related to shares issued
contingent on continued employment of certain employee stockholders and the intrinsic value of unvested stock
options assumed. The compensation is being recognized over the related vesting period. The related expenses are
identified with research and development, cost of revenues and selling, general and administration depending on
the function of the individual employee providing services.
Purchased Inventory Fair Value Adjustment
The purchased inventory fair value adjustment represents the difference between the carrying value of work
in process and finished goods inventory and the estimated selling price of the related inventory at the date of
acquisition. This adjustment was fully charged to cost of sales in the year ended March 31, 2001 as the related
inventory was sold.
6. Stockholders’ Equity
Preferred Stock
The Certificate of Incorporation allows the issuance of up to 2,000,000 shares of preferred stock in one or
more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights,
dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences,
and the number of shares constituting any series of the designation of such series, without further vote or action
by the stockholders.
Stock Options and Other Stock Awards
The Company has in effect several stock option plans under which non-qualified and incentive stock options
have been granted to employees and non-employee directors. The option plans include two stockholder-approved
plans (1992 Stock Option Plan and 1997 Directors’ Stock Option Plan) and two plans not approved by
stockholders (2000 Equity Incentive Plan and Cimaron’s 1998 Stock Incentive Plan assumed in the fiscal 1999
merger). Certain other outstanding options were assumed through the various fiscal 2001 acquisitions.
The Board of Directors determines eligibility, vesting schedules and exercise prices for options granted
under the plans. Options and other stock awards under the plans expire not more than ten years from the date of
grant and are either exercisable immediately after the date of grant and subject to certain repurchase rights by the
Company until such ownership rights have vested, or exercisable upon vesting. Vesting generally occurs over
four years. At March 31, 2002 and 2003, 979,000 and 305,000 shares of common stock were subject to
repurchase, respectively. Options are granted at prices at least equal to fair value of the Company’s common
stock on the date of grant.
F-18