SanDisk 2006 Annual Report Download - page 77

lawsuits against msystems and its directors, officers, employees and former employees by stockholders and other
third-parties; the cost of defending any shareholder derivative suits; the cost of governmental, law enforcement or
regulatory investigations; civil or criminal fines and penalties; expenses associated with further financial restate-
ments; auditor, legal and other expenses; and expenses associated with the remedial measures, if any, which may be
imposed.
Charges and other accounting changes resulting from the merger may adversely affect our earnings and the
market value of our common stock following the merger. The acquisition of msystems required a one-time write-
off by us of in-process research and development, and has resulted in the amortization of identifiable purchased
intangible assets, increased depreciation and increased share-based compensation charges by us. If goodwill created
in the acquisition becomes impaired, we may be required to incur material charges relating to the impairment of that
asset. In addition, the acquisition could result in us incurring impairment charges to write down the carrying amount
of msystems assets that may not be fully utilized or realized by us. Any of the foregoing could have a material
adverse effect on our consolidated financial position and results of operations and the market value of our common
stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
Our principal facilities are located in Milpitas, California. We lease four adjacent buildings comprising
approximately 444,000 square feet. These facilities house our corporate offices, the majority of our engineering
team, as well as a portion of our sales, marketing, operations and corporate services organizations. We occupy this
space under lease agreements that expire in 2011 and 2013.
With our acquisition of msystems, we acquired two owned buildings of approximately 148,000 square feet
located at Kfar Saba, Israel, that house our administrative offices, research, development and manufacturing
facilities. In addition, we also own a vacant land plot of approximately 70,000 square feet adjacent to our property
located at Kfar Saba, Israel, for further expansion.
Our subsidiary, Microelectronica Espanola S.L.U., leases office space in Madrid, Spain, of approximately
8,800 square feet, and a manufacturing plant in Madrid, Spain, of approximately 7,000 square feet.
In December 2006, we acquired a 50-year land lease in Shanghai, China, of approximately 199,000 square
feet, on which we plan to build an advanced testing and assembly facility, which is expected to be completed in
fiscal 2007.
We also lease sales and marketing offices in the United States, China, Germany, Hong Kong , Ireland, Israel,
Japan, Korea, Scotland, Spain and Taiwan; operation support offices in Taichung, Taiwan; Shanghai and Shenzhen,
China; Bangalore, India; and design centers in Omer, Tefen and Petah Tikva, Israel; Edinburgh, Scotland and
Madrid, Spain.
ITEM 3. LEGAL PROCEEDINGS
From time-to-time, it has been and may continue to be necessary to initiate or defend litigation against third
parties. These and other parties could bring suit against us. In each case listed below where we are the defendant, we
intend to vigorously defend the action.
On October 31, 2001, the Company filed a complaint for patent infringement in the United States District
Court for the Northern District of California against Memorex Products, Inc., Pretec Electronics Corporation, Ritek
Corporation, and Power Quotient International Co., Ltd. In the suit, captioned SanDisk Corp. v. Memorex Products,
Inc., et al., Civil Case No. CV 01 4063 VRW, the Company seeks damages and injunctions against these companies
from making, selling, importing or using flash memory cards that infringe its U.S. Patent No. 5,602,987. The
District Court granted summary judgment of non-infringement in favor of defendants Ritek, Pretec and Memorex
and entered judgment on May 17, 2004. On June 2, 2004, the Company filed a notice of appeal of the summary
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