TiVo 2005 Annual Report Download - page 38

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Table of Contents
Securities Litigation. On June 12, 2001, a securities class action lawsuit in which the Company and certain of its officers and directors are named as
defendants was filed in the United States District Court for the Southern District of New York. This action, which is captioned Wercberger v. TiVo et al., also
names several of the underwriters involved in the Company's initial public offering as defendants. This class action was brought on behalf of a purported class
of purchasers of the Company's common stock from September 30, 1999, the time of its initial public offering, through December 6, 2000. The central
allegation in this action is that the underwriters in the initial public offering solicited and received undisclosed commissions from, and entered into
undisclosed arrangements with, certain investors who purchased TiVo common stock in the initial public offering and the after-market. The complaint also
alleges that the TiVo defendants violated the federal securities laws by failing to disclose in the initial public offering prospectus that the underwriters had
engaged in these alleged arrangements. More than 150 issuers have been named in similar lawsuits. In July 2002, an omnibus motion to dismiss all complaints
against issuers and individual defendants affiliated with issuers (including the TiVo defendants) was filed by the entire group of issuer defendants in these
similar actions. On October 8, 2002, TiVo's officers were dismissed as defendants in the lawsuit. On February 19, 2003, the court in this action issued its
decision on defendants' omnibus motion to dismiss. This decision dismissed the Section 10(b) claim as to TiVo but denied the motion to dismiss the
Section 11 claim as to TiVo and virtually all of the other issuer-defendants.
On June 26, 2003, the plaintiffs announced a proposed settlement with the Company and the other issuer defendants. The proposed settlement provides
that the plaintiffs will be guaranteed $1.0 billion dollars in recoveries by the insurers of the Company and other issuer defendants. Accordingly, any direct
financial impact of the proposed settlement is expected to be borne by the Company's insurers in accordance with the proposed settlement. In addition, the
Company and the other settling issuer defendants will assign to the plaintiffs certain claims that they may have against the underwriters. If recoveries in
excess of $1.0 billion dollars are obtained by the plaintiffs from the underwriters, the Company's and the other issuer defendants' monetary obligations to the
class plaintiffs will be satisfied. Furthermore, the settlement is subject to a hearing on fairness and approval by the Federal District Court overseeing the IPO
Litigation. On February 15, 2005, the Court issued an order preliminarily approving the terms of the proposed settlement. The Court also certified the
settlement classes and class representatives for purposes of the proposed settlement only. On August 31, 2005, the Court issued an order scheduling a fairness
hearing for April 2006 to determine whether the proposed settlement should be approved. Due to the inherent uncertainties of litigation and assignment of
claims against the underwriters, and because the settlement has not yet been finally approved by the Federal District Court, the ultimate outcome of the matter
cannot be predicted. In accordance with Statement of Financial Accounting Standards No. 5, "Accounting for Contingencies" the Company believes any
contingent liability related to this claim is not probable or estimable and therefore no amounts have been accrued in regards to this matter as of January 31,
2006.
The Company is involved in numerous lawsuits in the ordinary course of its business. The Company assesses potential liabilities in connection with
these lawsuits under Statement of Financial Accounting Standards No. 5, "Accounting for Contingencies." The Company accrues an estimated loss for these
loss contingencies if both of the following conditions are met: information available prior to issuance of the financial statements indicates that it is probable
that a liability has been incurred at the date of the financial statements and the amount of loss can be reasonably estimated. As of January 31, 2006, the
Company had not accrued a liability for any of the lawsuits filed against it as the conditions for accrual have not been met. The Company expenses legal costs
as they are incurred.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the quarter ended January 31, 2006.
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