AMD 1998 Annual Report Download - page 251

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14. Contingencies
I. Litigation
A. McDaid v. Sanders, et al.; Kozlowski, et al. v. Sanders, et al. We entered
into a Memorandum of Understanding during 1998, which settled this class action
lawsuit against us and certain of our current and former officers and directors
for $11.5 million. Our Board of Directors approved the settlement on April 30,
1998. The Federal Court approved the settlement on November 2, 1998 and
dismissed the case.
B. AMD v. Altera Corporation. This litigation, which began in 1994, involves
multiple claims and counterclaims for patent infringement relating to our and
Altera Corporation's programmable logic devices. In a trial held in May 1996,
a jury found that at least five of the eight AMD patents-in-suit were licensed
to Altera. As a result of the bench trial held in August 1997, the Court held
that Altera is licensed to the three remaining AMD patents-in-suit. Seven
patents were asserted by Altera in its counterclaim against AMD. The court
determined that we are licensed to five of the seven patents and two remain in
suit. Altera filed a motion to recover attorneys' fees in November 1997. We then
filed, and the Court granted, a motion to stay determination of the attorneys'
fees motion until resolution of its appeal. We have filed an appeal of the
rulings of the jury and Court determinations that Altera is licensed to each of
our eight patents-in-suit. Both parties filed briefs and the Federal Court of
Appeal heard oral argument on our appeal on November 3, 1998. Based upon
information presently known to management, we do not believe that the ultimate
resolution of this lawsuit will have a material adverse effect on our financial
condition or results of operations.
C. Ellis Investment Co., Ltd v. AMD, et al. This class action complaint was
filed against AMD and an individual officer of AMD on March 10, 1999. The
complaint alleges that we made misleading statements about the design and
production of the AMD-K6 microprocessor in violation of Section 10(b) of the
Exchange Act and Rule 10b-5 promulgated thereunder. The plaintiff seeks to
represent a class comprised of all persons who purchased our common stock during
the period from November 12, 1998 through March 8, 1999. The complaint seeks
unspecified damages, cost and fees. Following the filing of this complaint,
several law firms published press releases announcing that they had filed, or
intend to file, substantially similar class action complaints. As of March 12,
1999, we had not seen or been served with those complaints. Based upon
information presently known to management, we do not believe that the ultimate
resolution of these lawsuits will have a material adverse effect on our
financial condition or results of operations.
II. Environmental Matters
Clean-Up Orders. Since 1981, we have discovered, investigated and begun
remediation of three sites where releases from underground chemical tanks at our
facilities in Santa Clara County, California adversely affected the ground
water. The chemicals released into the ground water were commonly in use in the
semiconductor industry in the wafer fabrication process prior to 1979. At least
one of the released chemicals (which is no longer used by AMD) has been
identified as a probable carcinogen.
In 1991, we received four Final Site Clean-up Requirements Orders from the
California Regional Water Quality Control Board, San Francisco Bay Region,
relating to the three sites. One of the orders named AMD as well as TRW
Microwave, Inc. and Philips Semiconductors Corporation. In January 1999, we
entered into a settlement with Philips, whereby Philips will assume costs
allocated to AMD under this order, although we would be respon-sible for these
costs in the event that Philips does not fulfill its obligations under the
settlement agreement. Another of the orders named AMD as well as National
Semiconductor Corporation.
The three sites in Santa Clara County are on the National Priorities List
(Superfund). If we fail to satisfy federal compliance requirements or
inadequately perform the compliance measures, the government (1) can bring an
action to enforce compliance, or (2) can undertake the desired response actions
itself and later bring an action to recover its costs, and penalties, which is
up to three times the costs of clean-up activities, if appropriate. With regard
to certain claims related to this matter, the statute of limitations has been
tolled.
We have computed and recorded the estimated environmental liability in
accordance with applicable accounting rules and have not recorded any potential
insurance recoveries in determining the estimated costs of the clean-up. The
amount of environmental charges to earnings has not been material during any of
the last three fiscal years. We believe that the potential liability, if any, in
excess of amounts already accrued with respect to the foregoing environmental
matters, will not have a material adverse effect on our financial condition or
results of operations.
We received a notice dated October 14, 1998 from the Environmental Protection
Agency (EPA) indicating that the EPA has determined AMD to be a potentially
responsible party that had arranged for disposal of hazardous substances at a
site located in Santa Barbara County, California. We believe that this matter
Source: ADVANCED MICRO DEVIC, 10-K, March 29, 1999