3Ware 2002 Annual Report Download - page 76

APPLIED MICRO CIRCUITS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
financial prospects of the Company, mismanagement, inflation of stock value and sale of stock at inflated prices
for personal gain during the period from November 2000 through February 2001. Defendants demurred to the
consolidated state complaint, which demurrer was partially granted and partially overruled in February 2002.
Defendants took a writ of mandate seeking review of the court’s order by the Court of Appeal of California,
which writ was dismissed in March 2002. Defendants have petitioned the Supreme Court of California for review
of the denied portion of the demurrer. The petition has not yet been granted or dismissed. In February 2002, the
Company’s board of directors formed a special litigation committee to evaluate the claims in the consolidated
state complaint. The special litigation committee has retained independent legal counsel. The San Diego
Superior Court has stayed discovery against the Company until July 2002 when the special litigation committee
will deliver its report to the court. Limited discovery against the individual defendants in this lawsuit and third
parties has commenced.
The Company believes that the allegations in these lawsuits are without merit and intends to defend the
lawsuits vigorously. The Company cannot predict the likely outcome of these lawsuits, and an adverse result in
either lawsuit could have a material adverse effect on the Company. The lawsuits have been tendered to the
Company’s insurance carriers.
The Company is party to various claims and legal actions arising in the normal course of business, including
notification of possible infringement on the intellectual property rights of third parties. In addition, since 1993 the
Company has been named as a potentially responsible party ( “PRP”) along with a large number of other
companies that used Omega Chemical Corporation ( “Omega”) in Whittier, California to handle and dispose of
certain hazardous waste material. The Company is a member of a large group of PRPs that has agreed to fund
certain remediation efforts at the Omega site for which the Company has accrued approximately $100,000. On
September 14, 2000, the Company entered into a consent decree with the Environmental Protection Agency,
pursuant to which the Company agreed to fund its proportionate share of the initial remediation efforts at the
Whittier site. Although the ultimate outcome of these matters is not presently determinable, management believes
that the resolution of all such pending matters, net of amounts accrued, will not have a material adverse affect on
the Company’s financial position or liquidity; however, there can be no assurance that the ultimate resolution of
these matters will not have a material impact on the Company’s results of operations in any period.
13. Related Party Transactions
In August 2000, the Company made a strategic equity investment of $10 million in Raza Foundries which is
included in the total strategic equity investments of $14.5 million as of March 31, 2002. The Chief Executive
Officer and Chairman of the Board of Directors of Raza Foundries is a member of the Company’s Board of
Directors.
From time to time the Company charters an aircraft for business purposes from an aircraft charter company
which manages an aircraft owned by a company that the Company’s Chairman of the Board and Chief Executive
Officer controls. In fiscal 2002, the Company paid approximately $200,000 to the aircraft charter company.
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