SanDisk 2010 Annual Report Download - page 37

Proxy Statement
opportunity, will vest only upon the achievement of certain pre-established corporate performance goals based on
one or more of the following criteria: (1) return on total stockholder equity; (2) earnings per share; (3) net income
or operating income before or after acquisition-related charges and charges for stock-based compensation (all
before or after taxes); (4) earnings before interest, taxes, depreciation and amortization; (5) earnings before
interest, taxes, depreciation, amortization, acquisition-related charges and charges for stock-based compensation;
(6) sales or revenue targets; (7) return on assets, capital or investment; (8) cash flow; (9) market share; (10) cost
reduction goals; (11) budget comparisons; (12) measures of customer satisfaction; (13) measures of inventory
turns or inventory weeks of supply; (14) new product development or successful completion of research and
development projects; (15) the formation of joint ventures, research or development collaborations, or the
completion of other corporate transactions intended to increase the Company’s revenue or profitability or
enhance the Company’s customer base; and (16) any combination of, or a specified increase in, any of the
foregoing. Any of the performance goals related to profitability may be based on either a GAAP or a non-GAAP
measure, as determined by the Compensation Committee, provided that such non-GAAP measures comply with
the requirements of Section 162(m) of the Code. In addition, such performance goals may be based upon the
attainment of specified levels of the Company’s performance under one or more of the measures described above
relative to the performance of other entities and may also be based on the performance of any of the Company’s
business units or divisions or any parent or subsidiary. Performance goals may include a minimum threshold
level of performance below which no award will be earned, levels of performance at which specified portions of
an award will be earned and a maximum level of performance at which an award will be fully earned.
The plan administrator will have the discretionary authority at any time to accelerate the vesting of any and
all shares of restricted stock or other unvested shares outstanding under the stock issuance program. However, no
vesting requirements tied to the attainment of performance objectives may be waived with respect to shares
which were intended at the time of issuance to qualify as performance-based compensation under
Section 162(m), except in the event of changes in control or ownership.
Outstanding restricted stock units or other stock-based awards under the stock issuance program will
automatically terminate, and no shares of Common Stock will actually be issued in satisfaction of those units or
awards, if the performance goals or service requirements established for such units or awards are not attained.
The plan administrator, however, will have the discretionary authority to issue shares of Common Stock in
satisfaction of one or more outstanding restricted stock units or other stock-based right awards as to which the
designated performance goals or service requirements are not attained. However, no vesting requirements tied to
the attainment of performance objectives may be waived with respect to units or awards which were intended at
the time of issuance to qualify as performance-based compensation under Section 162(m), except in the event of
changes in control or ownership.
Automatic Grant Program. Under the automatic grant program, each non-employee Board member will
automatically receive, upon his or her initial appointment or election to the Board, an option grant for a specified
number of shares of Common Stock, provided such individual has not been in the Company’s employ during the
immediately preceding twelve (12) months. In addition, on the date of each annual stockholders meeting, each
individual serving as a non-employee Board member at that time will automatically be granted an option to
purchase a specified number of shares of Common Stock, provided such individual has served on the Board for at
least six (6) months. The specific number of shares subject to each such initial or annual option grant will be
determined by the Compensation Committee of the Company’s Board of Directors, but will not exceed
150,000 shares in the case of an initial grant or 40,000 shares in the case of an annual grant. Accordingly, the size
of the initial option grant may vary as to each new non-employee Board member, and the size of the annual
option grants may vary from year to year.
Each automatic grant will have an exercise price per share equal to the fair market value per share of
Common Stock on the grant date and will have a term of seven (7) years, subject to earlier termination following
the optionee’s cessation of Board service. The option will be immediately exercisable for all of the option shares;
however, the Company may repurchase, at the lower of the exercise price paid per share or the fair market value
per share, any shares purchased under the option which are not vested at the time of the optionee’s cessation of
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