SanDisk 2013 Annual Report Download - page 28

who has been elected or re-elected at such Annual Meeting of Stockholders also receives (i) the Annual
Option Grant, and (ii) an RSU grant for a number of units determined by dividing $125,000 by the average
closing price per share of Common Stock on NASDAQ for the five (5) trading days ended on, and
including, the grant date (the ‘‘Revised Annual Unit Grant’’ and, together with the Original Annual Unit
Grant, the ‘‘Annual Unit Grants’’). The initial and annual awards described in this paragraph are granted
under, and are subject to, the Company’s 2013 Incentive Plan (the ‘‘2013 Plan’’ and together with the 2005
Plan, the ‘‘Incentive Plans’’).
Initial and Annual Stock Option Grants. The Initial and Annual Option Grants are granted with a per
share exercise price equal to the fair market value of a share of Common Stock on the grant date. For
these purposes, and in accordance with the terms of the Incentive Plans and the Company’s share-based
award grant practices, the fair market value is equal to the closing price of a share of the Common Stock
on NASDAQ on the grant date.
The stock options granted to Non-Employee Directors are immediately exercisable. However, upon a
Non-Employee Director’s cessation of service with the Company, any shares purchased upon exercise of
the option that have not vested (as described below) are subject to repurchase by the Company at the
lower of (i) the exercise price paid for the shares or (ii) the fair market value of the shares at the time of
repurchase (as determined under the 2005 Plan or 2013 Plan, as applicable). This type of stock option is
generally referred to as an ‘‘early exercise’’ stock option because the holder is permitted to exercise the
option prior to the time that the underlying shares vest. Subject to the Non-Employee Director’s continued
service, the shares subject to the Initial Option Grant vest, and the Company’s repurchase right lapses, in
four substantially equal annual installments on each of the first through fourth anniversaries of the grant
date. Subject to the Non-Employee Director’s continued service, the shares subject to the Revised Initial
Option Grant and the Annual Option Grants vest, and the Company’s repurchase right lapses, in one
installment on the earlier of (i) first anniversary of the grant date or (ii) the day immediately preceding the
next Annual Meeting of Stockholders following the grant date.
Once vested, each option will generally remain exercisable for fully vested shares of Common Stock
(i.e., shares which are not subject to the Company’s repurchase right) until its normal expiration date. Each
of the options granted to the Company’s Non-Employee Directors, under the Incentive Plans, has a term
of seven (7) years. However, vested stock options may terminate earlier in connection with a change in
control of the Company. Pursuant to the terms of the Incentive Plans, stock options granted to the
Company’s Non-Employee Directors will vest on an accelerated basis in connection with a change in
control of the Company. Shares subject to the option that have not vested will immediately terminate (or
be subject to the Company’s repurchase right to the extent already purchased under the option) upon the
cessation of the Non-Employee Director’s service. However, the shares subject to options vest, and the
Company’s repurchase right lapses, in full if the Non-Employee Director’s cessation of service is as a result
of the Director’s death or permanent disability. Non-Employee Directors generally have twelve
(12) months to exercise the vested portion of the option following a cessation of service.
The options granted to Non-Employee Directors do not include any dividend or dividend equivalent
rights. However, Non-Employee Directors are entitled to dividends with respect to shares purchased upon
the exercise of options, whether or not such shares have vested under the option, at the same rate as the
Company’s other stockholders.
Initial and Annual RSU Grants. Each RSU awarded to the Company’s Non-Employee Directors
represents a contractual right to receive one share of the Common Stock if the time-based vesting
requirements described below are satisfied.
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