SanDisk 2013 Annual Report Download - page 34

If the participant sells or otherwise disposes of the purchased shares within two years after the start
date of the offering period in which such shares were acquired or within one year after the actual purchase
date of those shares, then the participant will recognize ordinary income in the year of sale or disposition
equal to the amount by which the fair market value of the shares on the purchase date exceeded the
purchase price paid for those shares, and the Company will be entitled to an income tax deduction, for the
taxable year in which such disposition occurs, equal in amount to such excess.
If the participant sells or disposes of the purchased shares more than two years after the start date of
the offering period in which the shares were acquired and more than one year after the actual purchase
date of those shares, then the participant will recognize ordinary income in the year of sale or disposition
equal to the lesser of (i) the amount by which the fair market value of the shares on the sale or disposition
date exceeded the purchase price paid for those shares or (ii) the excess of the fair market value of the
shares on the start date of that offering period over the purchase price which would have been paid for
those shares had they been purchased on that start date, and any additional gain upon the disposition will
be taxed as a long-term capital gain. The Company will not be entitled to an income tax deduction with
respect to such disposition.
A participant who still owns the purchased shares at the time of death will recognize taxable income
equal to the lesser of (i) the amount by which the fair market value of the shares on the date of death
exceeds the purchase price or (ii) the excess of the fair market value of the shares on the start date of the
offering period in which those shares were acquired over the purchase price which would have been paid
for those shares had they been purchased on that start date.
Foreign Taxation
The income tax consequences to participants in the International Plan will vary by country. Generally,
those participants will be subject to taxation at the time the shares are purchased.
Accounting Treatment
Pursuant to the accounting principles currently applicable to employee stock purchase plans such as
the 2005 Purchase Plans, the fair value of each purchase right granted under the 2005 Purchase Plans will
be charged as a direct compensation expense to the Company’s reported earnings over the offering period
to which that purchase right pertains. The fair value of each such purchase right will be determined as of its
grant date.
New Plan Benefits
Because benefits under the 2005 Purchase Plans will depend on employees’ elections to participate
and the fair market value of the Company’s common stock at various future dates, it is not possible to
determine the benefits that will be received by executive officers and other employees if the amendment to
the 2005 Purchase Plans is approved by the stockholders. Non-employee directors are not eligible to
participate in the 2005 Purchase Plans.
Required Vote
The affirmative vote of the holders of a majority of the shares present in person or represented by
proxy and entitled to vote on Proposal No. 2 is required for approval of the amendment to the 2005
Purchase Plans described above. If stockholders do not approve this proposal, then the current terms and
conditions of the 2005 Purchase Plans will continue in effect.
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