SanDisk 2006 Annual Report Download - page 40

of options, exercisable to the extent such outstanding awards are not substituted or assumed in connection with the
transaction. Any options that become vested in connection with a change in control generally must be exercised
prior to the change in control, or they will be canceled in exchange for the right to receive a cash payment in
connection with the change in control transaction. In addition, if there is a change in control of the Company, the
Compensation Committee may terminate the performance period applicable to the cash incentive award and pro-
rate (based on the number of days during the performance period prior to the transaction) the bonus and
performance targets based on year-to-date performance.
Stock Options
Each stock option reported in column (g) of the table above was granted with a per-share exercise price equal to
the fair market value of a share of the Company’s Common Stock on the grant date. For these purposes, and in
accordance with the terms of the 2005 Plan and the Company’s option grant practices, the fair market value is equal
to the closing price of a share of Common Stock on the NASDAQ Global Select Market on the applicable grant date.
Each stock option granted to our Named Executive Officers in fiscal 2006 is subject to a four (4) year vesting
schedule, with 25% of the option vesting on February 16, 2007, and the remaining 75% of the option vesting in
twelve (12) substantially equal installments on each successive three (3) month anniversary of February 16, 2007.
Once vested, each stock option will generally remain exercisable until its normal expiration date. Each of the stock
options granted to our Named Executive Officers in fiscal 2006 has a term of seven (7) years. Outstanding options,
however, may terminate earlier in connection with a change in control transaction or a termination of the Named
Executive Officer’s employment. Subject to any accelerated vesting that may apply, the unvested portion of the
stock option will immediately terminate upon a termination of the Named Executive Officer’s employment. The
Named Executive Officer will generally have three (3) months to exercise the vested portion of the stock option
following a termination of employment. This period is extended to twelve (12) months if the termination is on
account of the Named Executive Officer’s death or permanent disability. However, if a Named Executive Officer’s
employment is terminated by the Company for “misconduct” (as determined under the plan), outstanding stock
options (whether vested or unvested) will immediately terminate.
The stock options granted to Named Executive Officers during fiscal 2006 do not include any dividend or
dividend equivalent rights.
Restricted Stock Units
Each restricted stock unit awarded to our Named Executive Officers in fiscal 2006 represents a contractual
right to receive one share of the Company’s Common Stock if the time-based vesting requirements described below
are satisfied. Restricted stock units are credited to a bookkeeping account established by the Company on behalf of
each Named Executive Officer.
Each restricted stock unit award is subject to a four (4) year vesting schedule, with 25% of the restricted stock
unit vesting on February 16, 2007, and the remaining 75% of the restricted stock unit vesting in three (3) sub-
stantially equal installments on each successive one (1) year anniversary of February 16, 2007. Subject to any
accelerated vesting that may apply, upon the termination of a Named Executive Officer’s employment, any then-
unvested restricted stock units will generally terminate.
Restricted stock units will generally be paid in an equivalent number of shares of the Company’s Common
Stock as they become vested. Named Executive Officers are not entitled to voting or dividend rights with respect to
the restricted stock units. Non-Employee Directors are, however, entitled to the following dividend equivalent rights
with respect to the restricted stock units. If the Company pays a cash dividend on its Common Stock and the
dividend record date occurs after the grant date and before all of the restricted stock units have either been paid or
terminated, then the Company will credit the Named Executive Officer’s bookkeeping account with an amount
equal to (i) the per-share cash dividend paid by the Company on its Common Stock with respect to the dividend
record date, multiplied by (ii) the total number of outstanding and unpaid restricted stock units (including any
unvested restricted stock units) as of the dividend record date. These dividend equivalents will be subject to the
same vesting, payment and other terms and conditions as the original restricted stock units to which they relate
Proxy Statement
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