SanDisk 2010 Annual Report Download - page 68

employment occurs instead of a multiple of his target bonus, and only those equity awards which would have
become vested over the twenty-four months following Mr. Mehrotra’s termination of employment become
accelerated upon his termination of employment, instead of all of Mr. Mehrotra’s then outstanding equity awards
as provided for under the change of control agreement. In the event that Mr. Mehrotra is eligible to receive
severance benefits under both his severance agreement and his change of control agreement, he will be entitled
only to the severance benefits provided under his change of control agreement.
Please see the “Potential Payments Upon Termination or Change in Control” section below for a description
of the potential payments that may be made to the Named Executive Officers in connection with their
termination of employment or a change in control.
Dr. Harari Retirement Agreement
Dr. Harari retired as the Company’s Chief Executive Officer and as a director, effective as of December 31,
2010. Dr. Harari will serve as a consultant to the Company for a two-year period beginning January 1, 2011.
Under Dr. Harari’s consulting agreement, Dr. Harari will perform consulting services for the Company, including
technical advice and such other services as may be mutually determined with Mr. Mehrotra for a fee of $50,000
per year plus reimbursement of reasonable expenses.
In connection with Dr. Harari’s retirement, the Board, upon recommendation of the Compensation
Committee, entered into an agreement with Dr. Harari, providing for various payments in consideration of his
services to the Company and for (i) his agreement to assign to the Company any intellectual property relating to
the Company’s business that he creates during the two years following his resignation, (ii) his agreement to
non-competition and non-solicitation covenants for two years following his resignation, and (iii) his agreement to
serve as a consultant to the Company under the terms of the consulting agreement described above for two years
following his resignation or until a change in control of the Company.
Under the agreement with Dr. Harari, as subsequently amended by the Committee in November 2010
provided Dr. Harari with a payment in the amount of $3,000,000 before taxes on December 31, 2010 in
consideration of the foregoing, and provided that restricted stock units held by Dr. Harari that vest solely on the
passage of time would accelerate and vest in full on December 31, 2010. Any unvested stock options held by
Dr. Harari that vest solely on the passage of time will continue to vest on their current schedule over the term of
his consulting agreement provided that he continues to provide service to the Company. Any performance–based
awards that had not vested as of December 31, 2010 were to be cancelled. In addition, Dr. Harari remained
eligible for his annual cash-incentive bonus for fiscal 2010, which was paid as described above. On
December 31, 2012, or upon a change in control of the Company if earlier, all remaining unvested stock options
will vest in full, and Dr. Harari will then have 90 days to exercise the vested equity awards. Further, the
agreement provided that the Company provide Dr. Harari and his spouse with lifetime health benefits through a
one-time lump sum payment to Dr. Harari of $476,000 net of taxes on December 31, 2010; the total cost to the
Company was approximately $890,848.
Subsequent Committee Actions
In connection with its annual base salary review in February 2011, based on the factors discussed above
under “Base Salaries,” the Compensation Committee determined to set the Named Executive Officers’ base
salaries for fiscal 2011 as follows: Mr. Sadana, $385,000; Mr. Brelsford $393,750; Mr. Cedar $485,000 and
Ms. Bruner $540,000. These base salary adjustments reflect increases from the most recent salaries for each of
these Named Executive Officers of 10%, 5%, 2.1% and 5.9%, respectively. Because Mr. Mehrotra’s base salary
was adjusted effective January 1, 2011 in connection with his appointment as the Company’s President and Chief
Executive Officer, his base salary was not further adjusted by the Compensation Committee in February 2011.
In March 2011, the Compensation Committee established performance targets and a maximum individual
bonus payout amount in connection with the Company’s fiscal 2011 annual cash incentive award program for the
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