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
Citrix Systems, Inc.  Annual Report
13 and May 2, 2007, the court in the Southern District
of Florida held a hearing for the purpose of construing
disputed terms of the claims of the patent-in-suit. The court
issued its claim construction ruling in that case June 5,
2007. In addition, the United States Patent and Trademark
Office has decided to reexamine the patent at issue in the
Southern District of Florida case. The Company believes
that it has meritorious defenses to the allegations made in
each of the complaints and intends to vigorously defend
these lawsuits; however, it is unable to currently determine
the ultimate outcome of these matters or the potential
exposure to loss, if any.
On March 8, 2007, a purported stockholder derivative
action entitled Sheet Metal Workers Local 28 Pension
Fund v. Roger W. Roberts et al. (C.A. No. 07-60316),
was filed in the US District Court for the Southern
District of Florida against certain of the Company’s
current and former directors and officers, and against
the Company as a nominal defendant. The complaint
asserts, among other things, that certain stock option
grants made by the Company were dated and accounted
for inappropriately. The complaint seeks the recovery of
monetary damages and other relief for damage allegedly
caused to the Company.
The Company also received a demand letter dated
March 15, 2007 from a purported stockholder with respect
to certain stock option grants made to its current and
former directors and officers during the years 1996 through
2003. That demand letter asserts, among other things, that
certain stock option grants made by the Company were
dated and accounted for inappropriately. The demand
letter seeks, among other things, the commencement by
the Company’s Board of Directors of an action against
its directors and officers from 1996 forward for alleged
breaches of fiduciary duties in connection with the granting
of the options.
In July 2007, two additional purported stockholder
derivative actions entitled Ekas v. Citrix, et al. (Case No. 07-
16114-11) and Crouse v. Citrix, et al. (Case No. 07-16249-
03) were filed in the Circuit Court for Broward County,
Florida state court against certain of the Company’s
current and former directors and officers, and against the
Company as a nominal defendant. On August 14, 2007,
notices of removal were filed in both cases removing the
cases to the US District Court for the Southern District of
Florida, where they are currently pending. The complaints
in these actions assert, among other things, that certain
stock option grants made by the Company were dated
and accounted for inappropriately. As with the Sheet Metal
Workers’ complaint, the complaints in the Ekas and Crouse
actions seek the recovery of monetary damages and other
relief for damages allegedly caused to the Company. The
Company has moved to have all three cases consolidated.
Neither the purported stockholder derivative actions nor
the demand letter described above seeks to recover
amounts from the Company.
In addition, the Company is a defendant in various matters
of litigation generally arising out of the normal course of
business. Although it is difficult to predict the ultimate
outcome of these cases, management believes, based on
discussions with counsel, that any ultimate outcome would
not materially affect the Company’s financial position,
results of operations or cash flows.
Guarantees
FIN No. 45, Guarantor’s Accounting and Disclosure
Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, requires certain
guarantees to be recorded at fair value and requires a
guarantor to make disclosures, even when the likelihood
of making any payments under the guarantee is remote.
For those guarantees and indemnifications that do
not fall within the initial recognition and measurement
requirements of FIN No 45, the Company must continue to
monitor the conditions that are subject to the guarantees
and indemnifications, as required under existing generally
accepted accounting principles, to identify if a loss
has been incurred. If the Company determines that it
is probable that a loss has been incurred, any such
estimable loss would be recognized. The initial recognition
and measurement requirements do not apply to the
provisions contained in the majority of the Company’s
software license agreements that indemnify licensees
of the Company’s software from damages and costs
resulting from claims alleging that the Company’s software
infringes the intellectual property rights of a third party.
The Company has not made payments pursuant to these
provisions. The Company has not identified any losses
that are probable under these provisions and, accordingly,
the Company has not recorded a liability related to these
indemnification provisions.