3Ware 2005 Annual Report Download - page 93

APPLIED MICRO CIRCUITS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
that it will rule on the motion to dismiss the appeal when it rules on the merits of the appeal. Plaintiff’s opening
brief on the merits was filed in January 2005. The respondents’ brief was filed on March 1, 2005. Plaintiff’s reply
merits briefs were filed on April 25, 2005. The court has not set a date to hear oral arguments on the appeal.
In November 2001, a class action lawsuit was filed against JNI and the underwriters of its initial and
secondary public offerings of common stock in the U.S. District Court for the Southern District of New York,
case no. 01 Civ 10740 (SAS). The complaint alleges that defendants violated the Securities Exchange Act of
1934 in connection with JNI’s public offerings. This lawsuit is among more than 300 class action lawsuits
pending in this court that have come to be known as the “IPO laddering cases.” In June 2003, a proposed partial
global settlement, subsequently approved by JNI’s board of directors, was announced between the issuer
defendants and the plaintiffs that would guarantee at least $1 billion to investors who are class members from the
insurers of the issuers. The proposed settlement, if approved by the court and by the issuers, would be funded by
insurers of the issuers, and would not result in any payment by JNI or the Company. The Court has granted its
preliminary approval of settlement subject to defendants’ agreement to modify certain provisions of the
settlement agreements regarding contractual indemnification. JNI has accepted the Court’s proposed
modifications. The court has set a hearing for final approval of the settlement for January 9, 2006.
The Company cannot predict the likely outcome of these lawsuits, and an adverse result in any of these
lawsuits could have a material adverse effect on the Company.
The Company is also party to various claims and legal actions arising in the normal course of business,
including employee disputes and notification of possible infringement on the intellectual property rights of third
parties.
13. Related Party Transactions
In August 2000, the Company made a strategic equity investment of $10 million in Raza Foundries. The
Chief Executive Officer and Chairman of the Board of Directors of Raza Foundries was a member of the
Company’s Board of Directors until April 2003. In the year ended March 31, 2003, the Company recorded
impairment charges of $13.3 million to reduce the carrying value of its strategic equity investments, $10 million
of which relates to this investment.
From time to time the Company chartered an aircraft for business travel from an aircraft charter company,
which managed an aircraft owned by a company that AMCC’s former chief executive officer controlled. The
Company expensed a total of $(115,000), $800,000, and $800,000 for such charters during the years ended
March 31, 2005, 2004 and 2003, respectively. These amounts were within the limits on such expenses approved
by the board of directors.
14. Subsequent Events
On April 1, 2005, the Company paid approximately $29 million, net of its insurers coverage to fund the
settlement of the shareholder litigation. See Note 12 Contingencies.
On April 29, 2005, the Company negotiated an assignment of the excess lease liability assumed in the JNI
acquisition. As a result of this assignment, the Company reduced the estimated excess lease liability by $3.6
million with the offsetting amount reflected as a reduction to goodwill. This adjustment is reflected in the
consolidated balance sheet at March 31, 2005.
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