SanDisk 2003 Annual Report Download - page 60

‚ place us at a possible competitive disadvantage with respect to less leveraged competitors and
competitors that have better access to capital resources; and
‚ make us more vulnerable in the event of a downturn in our business.
There can be no assurance that we will be able to meet our debt service obligations, including our
obligations under the notes.
In addition, we have agreed to indemnify Toshiba for certain liabilities Toshiba incurs as a result of
Toshiba's guarantee of the FlashVision equipment lease arrangement. If FlashVision fails to meet its lease
commitments, and Toshiba fulÑlls these commitments under the terms of Toshiba's guarantee, then we will be
obligated to reimburse Toshiba for 49.9% of any claims and associated expenses under the lease, unless such
claims result from Toshiba's failure to meet its obligations to FlashVision or its covenants to the lenders.
Because FlashVision's new equipment lease arrangement is denominated in Japanese Yen, the maximum
amount of our contingent indemniÑcation obligation on a given date when converted to U.S. dollars will
Öuctuate based on the exchange rate in eÅect on that date. As of December 28, 2003, the maximum amount
of our contingent indemniÑcation obligation, which reÖects payments and any lease adjustments, was
approximately $125.5 million.
This contingent indemniÑcation obligation might constitute senior indebtedness under the notes and we
may use a portion of the proceeds from the notes to repay the obligation. This would result in the diversion of
resources from other important areas of our business and could signiÑcantly harm our business, Ñnancial
condition and results of operations.
We may not be able to satisfy a fundamental change oÅer under the indenture governing the notes.
The indenture governing the notes contains provisions that apply to a fundamental change. A fundamen-
tal change as deÑned in the indenture would occur if we were to be acquired for consideration other than
depository receipts or common stock traded on a major U.S. securities market. If someone triggers a
fundamental change, we may be required to oÅer to purchase the notes with cash. This would result in the
diversion of resources from other important areas of our business and could signiÑcantly harm our business,
Ñnancial condition and results of operations.
If we have to make a fundamental change oÅer, we cannot be sure that we will have enough funds to pay
for all the notes that the holders could tender. Our failure to redeem tendered notes upon a fundamental
change would constitute a default under the indenture and might constitute a default under the terms of our
other indebtedness, which would signiÑcantly harm our business and Ñnancial condition.
We may not be able to pay our debt and other obligations, which would cause us to be in default under the
terms of our indebtedness, which would result in harm to our business and Ñnancial condition.
If our cash Öow is inadequate to meet our obligations, we could face substantial liquidity problems. If we
are unable to generate suÇcient cash Öow or otherwise obtain funds necessary to make required payments on
the notes or our other indebtedness, we would be in default under the terms thereof, which would permit the
holders of the notes to accelerate the maturity of the notes and also could cause defaults under our other
indebtedness. Any such default would harm our business, prospects, Ñnancial condition and operating results.
In addition, we cannot assure you that we would be able to repay amounts due in respect of the notes if
payment of the notes were to be accelerated following the occurrence of any other event of default as deÑned
in the indenture governing the notes. Moreover, we cannot assure that we will have suÇcient funds or will be
able to arrange for Ñnancing to pay the principal amount due on the notes at maturity.
The notes and other indebtedness have rights senior to those of our current stockholders such that in the
event of our bankruptcy, liquidation or reorganization or upon acceleration of the notes due to an event of
default under the indenture and in certain other events, our assets will be available for distribution to our
current stockholders only after all senior indebtedness is repaid.
In the event of our bankruptcy, liquidation or reorganization or upon acceleration of the notes due to an
event of default under the indenture and in certain other events, our assets will be available for distribution to
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