SanDisk 2005 Annual Report Download - page 20

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Proxy Statement
PROPOSAL NO. 2
APPROVAL OF AMENDMENTS TO THE SANDISK CORPORATION 2005 INCENTIVE PLAN
The stockholders are being asked to approve amendments to the Company's 2005 Incentive Plan (the
""2005 Plan'') which will (1) increase the number of shares of Common Stock reserved for issuance under the
2005 Plan by an additional 15,000,000 shares, which is expected to be used over multiple years, and (2) give
the Company the flexibility to grant certain performance-based awards that would be payable in cash and
would be designed to satisfy the requirements for deductibility of compensation under Section 162(m) of the
U.S. Internal Revenue Code. If stockholders approve this 2005 Plan proposal, the performance-based award
feature of the 2005 Plan will also be extended through the first annual meeting of our stockholders that occurs
in 2011 (this expiration time is earlier than the general expiration date of the 2005 Plan and is required under
applicable tax rules). (See ""Summary Description of the 2005 Incentive Plan Ì Stock Issuance and Cash
Bonus Programs'' below.)
The shares available for grant under the 2005 Plan as of March 10, 2006 are as follows:
Shares approved for future grant under the 2005 Plan on May 27, 2005 ÏÏÏÏÏÏÏÏÏÏÏÏ 5,700,000
Shares that became available under the 2005 Plan pursuant to the cancellation or
termination of awards under predecessor plans between May 27, 2005 and
March 10, 2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 508,231
Awards granted under the 2005 Plan between May 27, 2005 and March 10, 2006, net
of cancellationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,641,631
Remaining shares available for future grant under the 2005 Plan, as of March 10,
2006ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 566,600
Unless an increase in the number of shares of Common Stock reserved for issuance under the 2005 Plan
is approved, the Company expects to exhaust the shares currently available for future grant in the third quarter
of fiscal 2006. The Company has been reducing the size of the average grant given to new and existing
employees. The requested increase of 15,000,000 shares to the 2005 Plan share reserve is expected to be used
over multiple years.
The Company believes that equity-based incentives have played a pivotal role in the Company's efforts to
attract and retain key personnel essential to the Company's long-term growth and financial success. For that
reason, the Company has structured the 2005 Plan to provide the Company with substantial flexibility in
designing equity incentives in an environment where a number of companies have moved from traditional
option grants to other stock or stock-based awards, such as stock appreciation rights, restricted stock and
restricted stock units. Accordingly, the 2005 Plan provides the Company with a broad array of equity
incentives to utilize for purposes of attracting and retaining the services of key individuals. The proposed share
increase will furnish the Company with the additional shares the Company needs to remain competitive in the
marketplace for executive talent and other key employees.
The proposed amendments to the 2005 Plan were approved by the Company's Board of Directors on
March 21, 2006, subject to stockholder approval at the Annual Meeting.
Summary Description of 2005 Incentive Plan
The principal terms and provisions of the 2005 Plan are summarized below. The summary, however, is
not intended to be a complete description of all the terms of the 2005 Plan and is qualified in its entirety by
reference to the complete text of the 2005 Plan, which appears (as proposed to be amended) as Annex A to
this Proxy Statement. Any stockholder who wishes to obtain a copy of the actual plan documents may do so
upon written request to Investor Relations at the Company's principal offices at 140 Caspian Court,
Sunnyvale, California 94089.
Incentive Programs. The 2005 Plan consists of three separate equity incentive programs: (i) the
discretionary grant program, (ii) the stock issuance program and (iii) the automatic grant program for the
non-employee members of the Company's Board of Directors. If stockholders approve the 2005 Plan proposal,
11