SanDisk 2008 Annual Report Download - page 36

to exercise options we hold under the convertible note hedge transactions whenever notes are converted. To unwind
their hedge positions with respect to those exercised options, the dealers or their affiliates expect to sell shares of our
common stock in secondary market transactions or unwind various over-the-counter derivative transactions with
respect to our common stock during the observation period, if any, for the converted notes.
The effect of any of these transactions on the market price of our common stock or the 1% Senior
Convertible Notes due 2013 will depend in part on market conditions and cannot be ascertained at this time.
However, any of these activities could adversely affect the value of our common stock and the value of the 1%
Senior Convertible Notes due 2013, and consequently affect the amount of cash and the number of shares of
common stock the holders will receive upon the conversion of the notes.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
Our principal facilities are located in Milpitas, California. We lease four adjacent buildings comprising
approximately 444,000 square feet. These facilities house our corporate offices, the majority of our engineering
team, as well as a portion of our sales, marketing, operations and corporate services organizations. We occupy
this space under lease agreements that expire in 2011 and 2013. In addition, we own two buildings comprising
approximately 157,000 square feet located in Kfar Saba, Israel, that house administrative offices and research
and development facilities. The buildings are located on a 99-year land lease of approximately 268,000 square
feet of which approximately 70,000 square feet is vacant land for future expansion. We have a 50-year land lease
in Tefen, Israel of approximately 87,000 square feet of vacant land for future expansion.
We have a 50-year land lease in Shanghai, China of approximately 653,000 square feet on which we own an
advanced testing and assembly facility of approximately 363,000 square feet. We lease office space of
approximately 29,000 square feet and manufacturing space of approximately 21,000 square feet in Madrid, Spain.
We also lease sales and marketing offices in the U.S., China, France, Germany, India, Ireland, Israel, Japan,
Korea, Russia, Scotland, Spain, Sweden, Taiwan and the United Arab Emirates; operation support offices in
Taichung, Taiwan; Hong Kong, Shanghai and Shenzhen, China; and New Delhi, India; and design centers in
Omer and Tefen, Israel; Edinburgh, Scotland; Bangalore, India and Madrid, Spain.
ITEM 3. LEGAL PROCEEDINGS
The flash memory industry is characterized by significant litigation seeking to enforce patent and other
intellectual property rights. The Company’s patent and other intellectual property rights are primarily responsible
for generating license and royalty revenue. The Company seeks to protect its intellectual property through
patents, copyrights, trademarks, trade secret laws, confidentiality agreements and other methods, and has been,
and likely will, continue to enforce such rights as appropriate through litigation and related proceedings. The
Company expects that its competitors and others who hold intellectual property rights related to its industry will
pursue similar strategies against it in litigation and related proceedings. From time-to-time, it has been and may
continue to be necessary to initiate or defend litigation against third parties. These and other parties could bring
suit against the Company. In each case listed below where the Company is the defendant, the Company intends
to vigorously defend the action. At this time, the Company does not believe it is reasonably possible that losses
related to the litigation described below have occurred beyond the amounts, if any, that have been accrued.
On October 15, 2004, the Company filed a complaint for patent infringement and declaratory judgment of
non-infringement and patent invalidity against STMicroelectronics N.V. and STMicroelectronics, Inc.
(collectively, “ST”) in the United States District Court for the Northern District of California, captioned SanDisk
Corporation v. STMicroelectronics, Inc., et al., Civil Case No. C 04 04379 JF. The complaint alleges that ST’s
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