SanDisk 2006 Annual Report Download - page 129

officer or director is, or was, serving at the Company’s request in such capacity. The term of the indemnification
period is for the officer’s or director’s lifetime. The maximum potential amount of future payments the Company
could be required to make under these indemnification agreements is 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 policy 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 31, 2006 or January 1, 2006, as this liability is not reasonably estimable even though liability under these
agreements is not remote.
The Company and Toshiba have agreed to mutually contribute to, and indemnify each other, Flash Partners and
Flash Alliance, for environmental remediation costs or liability resulting from Flash Partners or Flash Alliance’s
manufacturing operations in certain circumstances. In fiscal years 2004 and 2006, respectively, the Company and
Toshiba each engaged consultants to perform a review of the existing environmental conditions at the site of the
facility at which Flash Partners operations are located and Flash Alliance operations will be located to establish a
baseline for evaluating future environmental conditions. 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 Partners or
Flash Alliance infringe third-party patents. The Company has not made any indemnification payments under any
such agreements and as of December 31, 2006, no amounts have been accrued in the accompanying condensed
consolidated financial statements with respect to these indemnification guarantees.
Contractual Obligations and Off Balance Sheet Arrangements
Contractual Obligations. The following summarizes the Company’s contractual cash obligations, commit-
ments and off balance sheet arrangements at December 31, 2006, and the effect such obligations are expected to
have on its liquidity and cash flows in future periods (in thousands).
Total
Less than
1 Year
2-3Years
(Fiscal 2008
and 2009)
3-5 Years
(Fiscal 2010
and 2011)
More than 5
Years
(Beyond
Fiscal 2011)
Operating leases .................. $ 52,174 $ 8,777 $ 16,380 $ 13,980 $ 13,037
FlashVision, fabrication capacity
expansion costs, and reimbursement
for certain other costs including
depreciation .................... 202,144(4) 75,428 110,726 15,990 —
Flash Partners fabrication capacity
expansion and reimbursement for
certain other costs including
depreciation(1) .................. 2,593,168(4) 1,181,142 764,014 564,013 83,999
Flash Alliance start-up and
reimbursement for certain other
costs . . ....................... 10,000(4) — — — 10,000
Toshiba research and development ..... 66,000(4) 31,000 35,000 — —
Capital equipment purchases
commitments ................... 62,960 62,960 — — —
1% Convertible Senior Notes principal
and interest(2) .................. 1,319,443 12,250 24,500 24,500 1,258,193
Operating expense commitments ...... 8,972 8,972 — — —
Noncancelable production purchase
commitments(3) ................. 327,745(4) 327,745 — — —
Total contractual cash obligations ...... $4,642,606 $1,708,274 $950,620 $618,483 $1,365,229
F-30
Notes to Consolidated Financial Statements — (Continued)