SanDisk 2005 Annual Report Download - page 19

Special Option Committee
The Special Option Committee of the Board of Directors has the authority to grant options solely to
employees other than officers and Directors. The Special Option Committee, comprised of Director Harari,
acted by written consent on 52 occasions during fiscal 2005. The Special Option Committee and Director
Harari act pursuant to limiting guidelines adopted by the Board of Directors.
DIRECTOR COMPENSATION
In fiscal 2005, the Compensation Committee recommended, and the Board approved, amendments to the
Company's compensation arrangements for the Company's non-employee Directors. Under the amended
compensation arrangements, each non-employee Director is paid an annual retainer of $40,000. In addition,
each non-employee Director who is not a committee chair is paid an annual service fee of (i) $20,000 for
service on the Audit Committee, (ii) $7,500 for service on the Compensation Committee and (iii) $7,500 for
service on the Nominating and Governance Committee. In lieu of the standard committee service fees, each
committee chair is paid an annual service fee of (i) $30,000 for chairing the Audit Committee, (ii) $12,000
for chairing the Compensation Committee and (iii) $12,000 for chairing the Nominating and Governance
Committee.
In addition, a non-employee Director who first takes office and who has not been employed by the
Company in the preceding twelve (12) months will receive at the time of his or her initial appointment or
election to the Board (i) an initial option grant to purchase 25,000 shares of the Company's Common Stock,
and (ii) an initial restricted stock award for the number of shares of the Company's Common Stock
determined by dividing $320,000 by the average closing sale price per share of the Company's Common Stock
on the Nasdaq Stock Market for the 5 trading days ended on, and including, the grant date.
Each non-employee Board member who has served in that capacity for at least six (6) months will
receive an annual award consisting of (i) an option to acquire 6,250 shares of the Company's Common Stock
and (ii) a restricted stock award for the number of shares of the Company's Common Stock determined by
dividing $80,000 by the average closing sale price per share of the Company's Common Stock on the Nasdaq
Stock Market for the five (5) trading days ended on, and including, the date of the Annual Meeting of
Stockholders on which the award is made.
The options described above are granted at the closing price as reported on the Nasdaq Stock Market on
the date of grant and vest in accordance with the automatic stock option grant provisions of the Company's
2005 Incentive Plan. The restricted stock awards generally vest (i) with respect to initial grants, in four
(4) equal annual installments over four (4) years; and (ii) with respect to annual grants, in one
(1) installment at the end of one year. Additionally, each restricted stock award described above must be in
compliance with the requirements of Section IV of Article Four of the Company's 2005 Incentive Plan
governing the conversion of the automatic stock option grants into restricted stock awards.
Required Vote
The affirmative vote of the holders of a plurality of the shares present in person or represented by proxy at
the meeting and entitled to vote on Proposal No. 1 is required for approval of Proposal No. 1.
Recommendation of the Board of Directors
The Board believes that Proposal No. 1 is in the Company's best interests and in the best interests of its
stockholders and recommends a vote FOR the election of all of the above nominees.
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