SanDisk 2010 Annual Report Download - page 33

Proxy Statement
The Company believes that equity-based incentives have played a pivotal role in the Company’s efforts to
attract and retain key personnel essential to the Company’s long-term growth and financial success. For that
reason, the Company has structured the 2005 Plan to provide the Company with substantial flexibility in
designing equity incentives in an environment where a number of companies have moved from traditional option
grants to other stock or stock-based awards, such as stock appreciation rights, restricted stock and restricted stock
units. Accordingly, the 2005 Plan provides the Company with a broad array of equity incentives to utilize for
purposes of attracting and retaining the services of key individuals. The proposed amendment will furnish the
Company with the additional shares the Company needs to remain competitive in the marketplace for executive
talent and other key employees.
If the Company’s stockholders do not approve this 2005 Plan proposal, then the current share limits under,
and other terms and conditions of, the 2005 Plan will continue in effect.
Summary Description of the 2005 Plan
The principal terms of the 2005 Plan are summarized below. This summary is qualified in its entirety by the
full text of the 2005 Plan, which appears (as proposed to be amended) as Annex A to this Proxy Statement and
can be reviewed on the SEC’s website at http://www.sec.gov. You may also obtain, free of charge, a copy of the
2005 Plan by writing to Investor Relations at the Company’s principal offices at 601 McCarthy Blvd., Milpitas,
California 95035.
Incentive Programs. The 2005 Plan consists of three separate incentive programs: (i) the discretionary grant
program; (ii) the stock issuance and cash bonus program; and (iii) the automatic grant program for the
non-employee members of the Company’s Board of Directors. 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, other stock-based awards and cash bonuses for 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. As authorized by the 2005 Plan, the Company’s Board of
Directors has appointed a Special Option Committee 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 Special Option Committee currently consists of one Board
member, but may in the future consist of more than one Board member, as determined by the Board. The Board
has also appointed a Secondary Executive Committee to have separate but concurrent authority to make grants
under the discretionary grant program to individuals other than executive officers and Board members. The
Secondary Executive Committee currently consists of two officers, but may in the future consist of one or more
officers, as determined by the Board. 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
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