SanDisk 2010 Annual Report Download - page 64

In March 2010, the Compensation Committee approved a cash incentive plan for fiscal 2010 (the “2010 bonus
program”) in which each of the Named Executive Officers is a participant. Awards granted to these executives
under the 2010 bonus program are intended to qualify as “performance-based” for purposes of Section 162(m)
with respect to Dr. Harari, Mr. Mehrotra and Mr. Cedar. The Named Executive Officers’ awards under the 2010
bonus program include a target incentive amount, expressed as a percentage of base salary, which was approved
by the Compensation Committee based on its review of comparable bonus opportunities at the Company’s peer
companies, internal comparability with percentage targets of other executives and the executive’s level of
responsibility, experience and knowledge. The target incentive amounts generally increase as an executive’s
responsibilities increase, reflecting the Company’s compensation philosophy that, as an executive officer’s level
of responsibility increases, a greater portion of that officer’s total compensation should be dependent on the
Company’s performance. The target bonus for fiscal 2010 set in March 2010 for Dr. Harari was 125% of base
salary. Mr. Mehrotra’s target bonus was 100% of base salary, Ms. Bruner’s target bonus was 90% of base salary,
and Mr. Cedar’s target bonus was 90% of base salary. These target bonuses were the same for each of these
Named Executive Officers as in fiscal 2009, except that Mr. Cedar’s target bonus was increased from 75% to
90% of his base salary for fiscal 2010 as a result of the Compensation Committee’s subjective determination that
a target bonus of 90% of base salary for Mr. Cedar was appropriate in light of Mr. Cedar’s contributions and its
evaluation of the factors described above. Mr. Sadana’s and Mr. Brelsford’s target bonus percentages were not
set by the Compensation Committee in fiscal 2010 because they were not Named Executive Officers at the time
of the Compensation Committee’s deliberations in March 2010. Target bonus percentages for Mr. Sadana and
Mr. Brelsford were set at 70% of base salary respectively, by Dr. Harari upon Mr. Sadana’s appointment as
Senior Vice President and Chief Strategy Officer during fiscal 2010 and at the beginning of fiscal 2010 for
Mr. Brelsford, based on evaluation of the same factors described above. The maximum bonus for each Named
Executive Officer under the 2010 bonus program was 300% of his or her target bonus amount. Bonuses under the
2010 bonus program were determined based on the Company’s performance during fiscal 2010 relative to a
target level of non-GAAP earnings per share and the achievement of certain non-financial key strategic
objectives, with the Compensation Committee having discretion to vary the individual bonus amounts based on
such Company and individual performance factors it deems appropriate, subject to the maximum bonus amount
discussed above.
For fiscal 2010 the Compensation Committee established a bonus pool for the Company’s employees
including the Named Executive Officers based on Company performance against non-GAAP EPS goals and the
attainment of three strategic objectives relating to successful Company product development, sales and product
launches. The Company achieved the fiscal 2010 EPS metric with non-GAAP EPS of $4.60 per share against the
fiscal 2010 target of $2.75 per share but did not achieve the strategic objectives for fiscal 2010. Part II, Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operation—Non-GAAP
Financial Measures,” of the Company’s 2010 Form 10-K filed on February 23, 2011, includes a discussion of the
non-GAAP financial measures used by the Company. The table within the non-GAAP financial measures
discussion indicates how the Company’s non-GAAP net income (loss) was derived from the Company’s GAAP-
basis net income (loss) and showed how the corresponding per-share amount was derived. The discussion
following the table also includes a description of the adjustments shows in the table, including income tax
adjustments.
After the completion of fiscal 2010, the Compensation Committee evaluated the performance of the
Company and the individual performance of each Named Executive Officer during the year. The Committee
recognized the Company’s financial achievements and approved bonus payouts for fiscal 2010 that averaged in
excess of 200% of the target bonuses for the Named Executive Officers. Key consideration was given to the
actions taken by the Named Executive Officers to improve the Company’s financial results and financial
condition and the Company’s successes with respect to both measures in fiscal 2010. In light of the performance
and significant contributions of the executive team, the Compensation Committee determined that each Named
Executive Officer would receive a fiscal 2010 bonus significantly higher than his or her target bonus. Actual
bonuses for fiscal 2010 were $1,500,000 for Mr. Mehrotra (250% of his target bonus); $950,000 for Ms. Bruner
(207% of her target bonus); $730,000 for Mr. Cedar (170% of his target bonus); $375,000 for Mr. Sadana (215%
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