SanDisk 2014 Annual Report Download - page 189

SANDISK CORPORATION
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 28, 2014 in U.S. dollars based upon the yen/dollar
exchange rate at December 28, 2014 (in thousands):
Purchase Option
Payment of Exercise Price at
Principal Final Lease Guarantee
Annual Installments Amortization Terms Amount
Year 1 ..................................... $ 145,318 $ 15,073 $ 160,391
Year 2 ..................................... 120,164 10,236 130,400
Year 3 ..................................... 78,822 49,238 128,060
Year 4 ..................................... 45,157 8,892 54,049
Year 5 ..................................... 26,079 31,530 57,609
Year 6 ..................................... 2,564 17,891 20,455
Total guarantee obligations .................... $ 418,104 $ 132,860 $ 550,964
Guarantees
Indemnification Agreements. The Company has agreed to indemnify suppliers and customers for alleged
IP 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 28, 2014 and December 29, 2013, no amounts have been accrued in the 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 had no liabilities recorded for these
agreements as of December 28, 2014 and December 29, 2013, 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
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Annual Report