SanDisk 2010 Annual Report Download - page 32

PROPOSAL NO. 3
APPROVAL OF AMENDMENTS TO THE
SANDISK CORPORATION 2005 INCENTIVE PLAN
General
The stockholders are being asked to approve amendments to the Company’s Amended and Restated 2005
Incentive Plan (the “2005 Plan”), which was adopted, subject to stockholder approval, by the Board of Directors
on April 7, 2011. The primary purpose of the proposed amendments is to increase the number of shares of
Common Stock reserved for issuance under the 2005 Plan by an additional 9,000,000 shares, which is expected
to be used over multiple years.
The shares available for grant under the 2005 Plan as of February 25, 2011 are as follows:
Shares
• Shares approved for future grant under the 2005 Plan on and after May 27, 2005 ....... 25,700,000
• Shares that became available under the 2005 Plan pursuant to the cancellation or
termination of awards under predecessor plans between May 27, 2005 and February 25,
2011 .................................................................... 2,345,436
• Awards granted under the 2005 Plan between May 27, 2005 and February 25, 2011, net
of cancellations ........................................................... 23,289,946
• Remaining shares available for future grant under the 2005 Plan, as of February 25,
2011 .................................................................... 4,755,490
The following table sets forth information regarding outstanding grants under all plans as of February 25,
2011. Awards other than options and stock appreciation rights are referred to as full value awards in the table
below.
Plan
Options and Stock
Appreciation
Rights
Outstanding
(# of shares)
Weighted-Average
Exercise Price
$
Weighted-Average
Remaining Term
(years)
Full Value Awards
Outstanding
(# of shares)
2005 Plan ........................ 16,298,124 $36.70 4.2 1,913,820
Predecessor Plans ................. 4,123,728 $21.19 2.7 —
Assumed Plans ................... 1,048,936 $41.50 4.8 —
Total ........................... 21,470,788 $33.95 3.9 1,913,820
Unless an increase in the number of shares of Common Stock reserved for issuance under the 2005 Plan is
approved, the Company expects to exhaust the shares currently available for future grant in fiscal 2012 or 2013.
The requested increase of 9,000,000 shares to the 2005 Plan share reserve is expected to be used over multiple
years.
Section 162(m) of the Internal Revenue Code (“Section 162(m)”) generally disallows a tax deduction to
publicly-held companies for compensation paid to certain executive officers that exceeds $1 million per officer in
any year. Compensation that is deemed to be “qualified performance-based compensation” under Section 162(m)
is generally excluded from this limit. For any awards under the 2005 Plan to qualify as “qualified performance-
based compensation,” Section 162(m) requires that the material terms of the 2005 Plan, including its
performance measures, be approved by our stockholders once every five years. The performance measures are
presented in Section I(B)(2) of Article Three of the Plan, which appears (as proposed to be amended) in Annex A
to this Proxy Statement. The 2005 Plan, as proposed to be amended, is being submitted for approval by
stockholders so that certain awards granted may qualify as “qualified performance-based compensation” under
Section 162(m).
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