Although there is evidence that inside and outside counsel had advised Caremark's directors that
their contracts were in accord with the law, Caremark recognized that some uncertainty respecting
the correct interpretation of the law existed. In its 1992 annual report, Caremark disclosed the
ongoing government investigations, acknowledged that if penalties were imposed on the company
they could have a material adverse effect on Caremark's business, and stated that no assurance could
be given that its interpretation of the ARPL would prevail if challenged