SanDisk 2013 Annual Report Download - page 213

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table details the breakdown of the Company’s remaining guarantee obligations between
the principal amortization and the purchase option exercise price at the end of the term of the master lease
agreements, in annual installments as of December 29, 2013 in U.S. dollars based upon the yen/dollar
exchange rate at December 29, 2013 (in thousands).
Purchase Option
Payment of Exercise Price at
Principal Final Lease Guarantee
Annual Installments Amortization Terms Amount
Year 1 ..................................... $ 148,038 $ 42,233 $ 190,271
Year 2 ..................................... 103,858 17,319 121,177
Year 3 ..................................... 71,348 11,748 83,096
Year 4 ..................................... 28,696 66,716 95,412
Year 5 ..................................... 1,601 — 1,601
Total guarantee obligations .................... $ 353,541 $ 138,016 $ 491,557
Guarantees
Indemnification Agreements. The Company has agreed to indemnify suppliers and customers for alleged
intellectual property infringement. The scope of such indemnity varies, but may, in some instances, include
indemnification for damages and expenses, including attorneys’ fees. The Company may periodically
engage in litigation as a result of these indemnification obligations. The Company’s insurance policies
exclude coverage for third-party claims for patent infringement. Although the liability is not remote, the
nature of the patent infringement indemnification obligations prevents the Company from making a
reasonable estimate of the maximum potential amount it could be required to pay to its suppliers and
customers. Historically, the Company has not made any significant indemnification payments under any
such agreements. As of December 29, 2013, no amounts had been accrued in the accompanying
Consolidated Financial Statements with respect to these indemnification guarantees.
As permitted under Delaware law and the Company’s certificate of incorporation and bylaws, the
Company has agreements, or has assumed agreements in connection with its acquisitions, whereby it
indemnifies certain of its officers and employees, and each of its directors for certain events or occurrences
while the officer, employee or director is, or was, serving at the Company’s or the acquired company’s
request in such capacity. The term of the indemnification period is for the officer’s, employee’s or
director’s lifetime. The maximum potential amount of future payments the Company could be required to
make under these indemnification agreements is generally unlimited; however, the Company has a
Director and Officer insurance policy that may reduce its exposure and enable it to recover all or a portion
of any future amounts paid. As a result of its insurance coverage, the Company believes the estimated fair
value of these indemnification agreements is minimal. The Company has no liabilities recorded for these
agreements as of December 29, 2013 or December 30, 2012, as these liabilities are not reasonably
estimable even though liabilities under these agreements are not remote.
The Company and Toshiba have agreed to mutually contribute to, and indemnify each other and Flash
Ventures for, environmental remediation costs or liability resulting from Flash Ventures’ manufacturing
operations in certain circumstances. The Company and Toshiba have also entered into a Patent
Indemnification Agreement under which, in many cases, the Company will share in the expenses associated
with the defense and cost of settlement associated with such claims. This agreement provides limited
protection for the Company against third-party claims that NAND flash memory products manufactured
and sold by Flash Ventures infringe third-party patents. The Company has not made any indemnification
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Annual Report