SanDisk 2005 Annual Report Download - page 21

a new cash bonus feature will be added to the stock issuance program. The principal features of each program
are described below.
Administration. The Compensation Committee of the Company's Board of Directors will have the
exclusive authority to administer the discretionary grant and stock issuance and cash bonus programs with
respect to option grants, stock issuances and other stock-based awards made to the Company's executive
officers and Board members and will also have the authority to make grants, awards and issuances under those
programs to all other eligible individuals. However, the Company's Board of Directors may at any time
appoint a secondary committee of one or more Board members to have separate but concurrent authority with
the compensation committee to make grants, awards and issuances under those two programs to individuals
other than executive officers and Board members.
The term ""plan administrator,'' as used in this summary, will mean the Company's Compensation
Committee and any secondary committee, to the extent each such entity is acting within the scope of its
administrative authority under the 2005 Plan.
The Compensation Committee will have the limited discretion under the automatic grant program to
determine the number of shares subject to each grant made under that program, up to the maximum number
of shares permissible per grant, but all grants will otherwise be made in strict compliance with the express
terms of that program.
Eligibility. Executive officers and employees, as well as independent consultants and contractors, in the
Company's employ or in the employ of the Company's parent or subsidiary companies (whether now existing
or subsequently established) will be eligible to participate in the discretionary grant and stock issuance and
cash bonus programs. The non-employee members of the Company's Board of Directors will also be eligible to
participate in the discretionary grant and stock issuance programs as well as the automatic grant program. As
of March 10, 2006, approximately 1,243 persons (including six (6) executive officers) were eligible to
participate in the discretionary grant and stock issuance programs, and seven (7) non-employee Board
members were eligible to participate in those programs and the automatic grant program. If stockholders
approve the proposed amendments to the 2005 Plan, the persons eligible to participate in the stock issuance
program will also be eligible to participate in the cash bonus feature.
Securities Subject to 2005 Plan. If the share increase which is the subject of this Proposal is approved by
the Company's stockholders, then the number of shares of the Common Stock reserved for issuance over the
term of the plan will increase from approximately 6,208,231 shares to approximately 21,208,231 shares. As
part of the original provisions of the 2005 Plan previously approved by the Company's stockholders, the share
reserve is automatically increased, by up to an additional 10,000,000 shares of Common Stock, to the extent
any options outstanding under the Company's predecessor 1995 Stock Option Plan or predecessor 1995 Non-
Employee Directors Stock Option Plan (collectively, the ""Predecessor Plans'') subsequently expire or
terminate unexercised. Such latter increase will occur whether or not the stockholders approve the share
increase which is the subject of this Proposal.
As of March 10, 2006, 5,640,631 shares were subject to awards outstanding under the 2005 Plan and an
additional 566,600 shares remained available for future grant under the 2005 Plan. Additionally,
16,284,452 shares were subject to awards granted under predecessor plans and 392,502 shares were subject to
awards granted under plans assumed in connection with acquisitions.
No participant in the 2005 Plan may receive option grants, stand-alone stock appreciation rights, direct
stock issuances (whether vested or unvested) or other stock-based awards for more than 1,000,000 shares of
Common Stock in any single calendar year, subject to adjustment for subsequent stock splits, stock dividends
and similar transactions. Stockholder approval of this proposal will also constitute re-approval of that
1,000,000-share limitation for purposes of Internal Revenue Code Section 162(m). This limitation will assure
that any deductions to which the Company would otherwise be entitled upon the exercise of stock options or
stock appreciation rights granted under the discretionary grant program will not be subject to the $1 million
limitation on the income tax deductibility of compensation paid per executive officer imposed under
Section 162(m). In addition, one or more shares issued under the stock issuance program may also qualify as
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