SanDisk 2007 Annual Report Download - page 32

share-based incentives. There is no program, plan or policy related to the timing of grants to its executive officers in
coordination with the release of material nonpublic information. Long-term share-based incentive awards granted
to new hires or to promoted employees occur after the new hire has joined the Company or, in the case of a promoted
employee, after the promotion has been approved. For a newly hired or promoted executive officer, the associated
stock award is granted at the next meeting of the Compensation Committee. For a newly hired or promoted
employee who is not an executive officer, the associated stock award is granted by the Company’s Special Option
Committee, which takes actions every Friday.
Stock Options. The Company makes a portion of its long-term incentive awards to Named Executive Officers
in the form of stock options with an exercise price that is equal to the fair market value of the Company’s Common
Stock on the grant date. Thus, the Named Executive Officers will only realize value on their stock options if our
stockholders realize value on their shares. The stock options also function as a retention incentive for our executives
as they vest over a four year period following the grant date. In fiscal 2007, the Compensation Committee granted
stock options to each of our Named Executive Officers. The material terms of these options are described below
under “Grants of Plan-Based Awards.”
Restricted Stock Units. The Company may make a portion of its long-term incentive grants to Named
Executive Officers in the form of restricted stock units. A restricted stock unit represents a contractual right to
receive one share of the Company’s Common Stock if the applicable vesting requirements are satisfied. The
Company has determined that it is advisable to grant restricted stock units in addition to stock options (and in lieu of
larger stock option grants) in order to minimize stock expense to the Company and dilution. The restricted stock
units also function as a retention incentive as they vest over a four year period following the grant date. The material
terms of the unit awards are described below under “Grants of Plan-Based Awards.” The Company made grants of
restricted stock units to Named Executive Officers in fiscal 2006, but (except as discussed above with respect to
Mr. Mehrotra), did not grant restricted stock units to Named Executive Officers in fiscal 2007. The Company
decided to grant equity awards in 2007 to Named Executive Officers (except as discussed above with respect to
Mr. Mehrotra) in the form of option grants rather than a mix of restricted stock units and option grants in order to
more directly link the long-term compensation value of the Named Executive Officers with the value provided to
our stockholders.
401(k) Retirement Benefits
The Company provides retirement benefits to the Named Executive Officers under the terms of its tax-
qualified 401(k) plan. In fiscal 2007, the Company made a discretionary matching contribution on behalf of each
participant equal to one-half of the first 6% of compensation contributed to the plan by the participant. These
Company contributions function as a retention incentive as they vest ratably over the first four years of service with
the Company (as determined under the plan). The Named Executive Officers participate in the plan on substantially
the same terms as our other participating employees. The Company does not maintain any deferred compensation,
defined benefit or supplemental retirement plans for its Named Executive Officers.
Severance and Other Benefits Upon Termination of Employment or Change in Control
In order to achieve our compensation objective of attracting, retaining and motivating qualified executives, we
believe that we need to provide our Named Executive Officers with severance protections that are consistent with
the severance protections offered by our peer group companies. For Named Executive Officers, our philosophy is
that severance should only be payable upon certain terminations of employment in connection with a change in
control of the Company. We believe that the occurrence, or potential occurrence, of a change in control transaction
will create uncertainty regarding the continued employment of Named Executive Officers. This uncertainty results
from the fact that many change in control transactions result in significant organizational changes, particularly at
the senior executive level. In order to encourage the Named Executive Officers to remain employed with the
Company during an important time when their prospects for continued employment following the transaction are
often uncertain, we provide Named Executive Officers with severance benefits pursuant to a change in control
benefits agreement if their employment is terminated by us without cause or by the executive for good reason within
twelve months following a change in control. We believe that a protected period of twelve months following a
change in control is in line with the severance protections provided to comparable executives at our peer group
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