SanDisk 2010 Annual Report Download - page 82

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.
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
have 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 substantially 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.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
The Audit Committee is responsible for review, approval, or ratification of “related-person transactions”
between the Company or its subsidiaries and related persons. Under SEC rules, a related person is a director,
officer, nominee for director, or 5% stockholder of the company since the beginning of the last fiscal year and
their immediate family members. The Company has adopted written policies and procedures that apply to any
transaction or series of transactions in which the Company or a subsidiary is a participant, the amount involved
exceeds $120,000 and a related person has a direct or indirect material interest. The Audit Committee has
determined that, barring additional facts or circumstances, a related person does not have a direct or indirect
material interest in the following categories of transactions:
• any transaction with another company for which a related person’s only relationship is as an employee
(other than an executive officer), director, or beneficial owner of less than 5% of that company’s
shares, if the amount involved does not exceed the greater of $200,000, or 2% of that company’s total
annual revenue;
• compensation to executive officers determined by the Compensation Committee;
• compensation to directors determined by the Board;
• transactions in which all security holders receive proportional benefits; and
• banking-related services involving a bank depository of funds, transfer agent, registrar, trustee under a
trust indenture, or similar service.
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