SanDisk 2014 Annual Report Download - page 132

$17 million, based upon the exchange rate at December 28, 2014, from the seller to refund our building
improvement expenditures if the purchase obligation expires unexercised.
Long-Term Requirements. Depending on the forecasted demand for our products, we may decide to
make additional investments, which could be substantial, in wafer fabrication capacity and assembly and
test manufacturing equipment. We may also engage in merger or acquisition transactions, make equity
investments in other companies, or purchase or license technologies. These activities may require us to
raise additional financing, which could be difficult to obtain, and which if not obtained in satisfactory
amounts, could prevent us from funding Flash Ventures, increasing our wafer supply, developing or
enhancing our products, taking advantage of future opportunities, engaging in investments in or
acquisitions of companies, growing our business, responding to competitive pressures or unanticipated
industry changes, any of which could harm our business.
Financing Arrangements. As of December 28, 2014, we had $997 million aggregate principal amount of
our 1.5% Notes due 2017 and $1.50 billion aggregate principal amount of our 0.5% Notes due 2020
outstanding. See Note 7, ‘‘Financing Arrangements,’’ in the Notes to Consolidated Financial Statements of
this Form 10-K included in Item 8, ‘‘Financial Statement and Supplementary Data’’ of this report.
1.5% Notes due 2017. Concurrent with the issuance of the 1.5% Notes due 2017, we entered into a
convertible bond hedge transaction in which counterparties initially agreed to sell to us up to
approximately 19.1 million shares of our common stock, which is the number of shares initially issuable
upon conversion of the 1.5% Notes due 2017 in full, at a price of $52.37 per share. The convertible bond
hedge agreement contains provisions where the number of shares to be sold under the convertible bond
hedge transaction and the conversion price will be adjusted if we pay a cash dividend or make a
distribution to all or substantially all holders of our common stock. Adjusting for dividends paid through
December 28, 2014, the counterparties have agreed to sell to us up to approximately 19.4 million shares of
our common stock, which is the number of shares issuable upon conversion of the 1.5% Notes due 2017 in
full, at a price of $51.36 per share as of December 28, 2014. This convertible bond hedge transaction will be
settled in net shares and will terminate upon the earlier of the maturity date of the 1.5% Notes due 2017 or
the first day that none of the 1.5% Notes due 2017 remain outstanding due to conversion or otherwise. In
connection with the conversions of $3 million aggregate principal amount of the 1.5% Notes due 2017 as
described in ‘‘Short-Term Liquidity’’ above, we received 26,622 shares of our common stock from the
exercise of a portion of the convertible note hedges related to the conversion of $3 million aggregate
principal amount of the 1.5% Notes due 2017.
In addition, concurrent with the issuance of the 1.5% Notes due 2017, we sold warrants to acquire up
to approximately 19.1 million shares of our common stock at an exercise price of $73.3250 per share. The
warrant agreement contains provisions whereby the number of shares to be acquired under the warrants
and the strike price are adjusted if we pay a cash dividend or make a distribution to all or substantially all
holders of our common stock. Adjusting for dividends paid through December 28, 2014, holders of the
warrants may acquire up to approximately 19.5 million shares of our common stock at a strike price of
$71.9005 per share. The warrants mature on 40 different dates from November 13, 2017 through
January 10, 2018 and are exercisable at the maturity date. At each maturity date, we may, at our option,
elect to settle the warrants on a net share basis. As of December 28, 2014, the warrants had not been
exercised and remain outstanding.
0.5% Notes due 2020. Concurrent with the issuance of the 0.5% Notes due 2020, we entered into a
convertible bond hedge transaction in which counterparties agreed to sell to us up to approximately
16.3 million shares of our common stock, which is the number of shares issuable upon conversion of the
0.5% Notes due 2020 in full, at a price of $92.19 per share. The convertible bond hedge agreement
contains provisions where the number of shares to be sold under the convertible bond hedge transaction
and the conversion price will be adjusted if we pay a cash dividend greater than a regular quarterly cash
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