SanDisk 2008 Annual Report Download - page 41

Investigation become final. In its order, the Court also consolidated this action (Case Nos. 07-C-0605-C) with the
action discussed in the preceding paragraph (07-C-0607-C).
Between August 31, 2007 and December 14, 2007, the Company (along with a number of other
manufacturers of flash memory products) was sued in the Northern District of California, in eight purported class
action complaints. On February 7, 2008, all of the civil complaints were consolidated into two complaints, one on
behalf of direct purchasers and one on behalf of indirect purchasers, in the Northern District of California in a
purported class action captioned In re Flash Memory Antitrust Litigation, Civil Case No. C07-0086. Plaintiffs
allege the Company and a number of other manufacturers of flash memory products conspired to fix, raise,
maintain, and stabilize the price of NAND flash memory in violation of state and federal laws. The lawsuits
purport to be on behalf of purchasers of flash memory between January 1, 1999 through the present. The lawsuits
seek an injunction, damages, restitution, fees, costs, and disgorgement of profits. On April 8, 2008, the Company,
along with co-defendants, filed motions to dismiss the direct purchaser and indirect purchaser complaints. Also
on April 8, 2008, the Company, along with co-defendants, filed a motion for a protective order to stay discovery.
On April 22, 2008, direct and indirect purchaser plaintiffs filed oppositions to the motions to dismiss. The
Company’s, along with co-defendants’, reply to the oppositions was filed May 13, 2008. The Court took the
motions to dismiss and the motion for a protective order under submission on June 3, 2008, and has yet to issue
its ruling.
On November 6, 2007, Gil Mosek, a former employee of SanDisk IL Ltd. (“SDIL”), filed a lawsuit against
SDIL, Dov Moran and Amir Ban in the Tel-Aviv District Court, claiming that he and Amir Ban, another former
employee of SDIL, reached an agreement according to which a jointly-held company should have been
established together with SDIL. According to Mr. Mosek, SDIL knew about the agreement, approved it and
breached it, while deciding not to establish the jointly-held company. On January 1, 2008, SDIL filed a statement
of defense. Simultaneously, SDIL filed a request to dismiss the lawsuit, claiming that Mr. Mosek signed a waiver
in favor of SDIL, according to which he has no claim against SDIL. On February 12, 2008, Mr. Mosek filed a
request to allow him to present certain documents, which contain confidential information of SDIL. On
February 26, 2008, SDIL opposed this request, claiming that SDIL’s documents are the sole property of SDIL
and Mr. Mosek has no right to hold and to use them. On March 6, 2008, the court decided that Mr. Mosek has to
pay a fee according to the estimated amount of the claim. On April 3, 2008, Mr. Mosek filed a request to amend
the claim by setting the claim on an amount of NIS 3,000,000. On April 9, 2008, SDIL filed its response to this
request, according to which it has no objection to the amendment, subject to the issuance of an order for costs.
On April 10, 2008, the Court accepted Mr. Mosek’s request. According to the settlement agreement, reached
between the SDIL and Amir Ban in January 2008, Amir Ban shall indemnify and hold SDIL harmless with
regard to the claim filed by Mosek, as described in this section above. At a pre-trial hearing held on February 9,
2009, the Court indicated that Mr. Mosek should transfer his claim to the Tel-Aviv Labor Court due to the
District Court’s lack of jurisdiction. Mr. Mosek asked for the Court’s permission to divide the lawsuit into two
parts so the action against Amir Ban may be transferred to the Labor Court whereas the claim against SDIL
would remain in the District Court. The District Court has not yet ruled as to whether the portion of the claim
against Amir Ban should be transferred to the Labor Court together with the claim against SDIL.
In April 2006, the Company’s subsidiary SanDisk IL Ltd. (“SDIL”) terminated its supply and license
agreement (the “Agreement”) with Samsung. As a result of this termination, the Company’s subsidiary no longer
was entitled to purchase products on favorable pricing terms from Samsung, Samsung no longer had a
life-of-patent license to the Company’s subsidiary’s patents, and no further patent licensing payments would be
due. Samsung contested the termination and SDIL commenced an arbitration proceeding seeking a declaration
that its termination was valid. Samsung asserted various defenses and counterclaims in the arbitration. A hearing
was held in December 2007, and the arbitration panel issued an award on May 16, 2008 declaring that SDIL’s
termination of the agreement was valid and effective, and dismissing all Samsung’s counterclaims (the
“Award”). On July 24, 2008, in an action captioned Samsung Electronics Co., Ltd. v. SanDisk IL f/k/a
M-Systems Ltd., No. 08 Civ. 6596 (AKH), Samsung filed a petition to vacate the award in the District Court for
the Southern District of New York (“Samsung’s Petition”). On September 18, 2008, in an action captioned
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