SanDisk 2005 Annual Report Download - page 29

options or stock appreciation rights will, immediately prior to the effective date of a hostile take-over, vest
and become exercisable as to all the shares of Common Stock at the time subject to those options or
stock appreciation rights. In addition, the plan administrator will have the authority to structure one or
more awards under the stock issuance program so that the shares of Common Stock subject to those
awards will immediately vest upon the consummation of a hostile take-over. Alternatively, the plan
administrator may condition such vesting acceleration upon the subsequent termination of the individ-
ual's service within a designated period following the effective date of such hostile take-over.
(vii) A hostile take-over will be deemed to occur if (a) there is a change in the majority of the
Company's Board of Directors as a result of one or more contested elections for board membership or
(b) securities possessing more than fifty percent (50%) of the total combined voting power of the
Company's outstanding securities are acquired pursuant to a hostile tender offer.
The acceleration of vesting in the event of a change in the ownership or control may be seen as an anti-
takeover provision and may have the effect of discouraging a merger proposal, a takeover attempt or other
efforts to gain control of the Company.
Changes in Capitalization. In the event any change is made to the outstanding shares of the Company's
Common Stock by reason of any recapitalization, stock dividend, stock split, combination of shares, exchange
of shares or other change in corporate structure effected without the Company's receipt of consideration,
appropriate adjustments will be made to: (i) the maximum number and/or class of securities issuable under
the 2005 Plan; (ii) the maximum number and/or class of securities by which the share reserve may increase
by reason of the expiration or termination of unexercised options under the Predecessor Plans, (iii) the
maximum number and/or class of securities which may be issued without cash consideration under the stock
issuance program, (iv) the maximum number and/or class of securities for which any one person may be
granted stock options, stand-alone stock appreciation rights, direct stock issuances (whether vested or
unvested) and other stock based awards under the 2005 Plan per calendar year; (v) the number and/or class
of securities and the exercise price or base price per share in effect under each outstanding option or stock
appreciation right; (vi) the number and/or class of securities subject to each outstanding restricted stock unit
or other stock based award and the cash consideration (if any) payable per share; and (vii) the maximum
number and/or class of securities for which grants may subsequently be made under the automatic grant
program to new and continuing non-employee board members. Such adjustments will be designed to preclude
any dilution or enlargement of benefits under the 2005 Plan or the outstanding awards thereunder.
Valuation. The fair market value per share of the Company's Common Stock on any relevant date
under the 2005 Plan will be deemed to be equal to the closing selling price per share on that date on the
Nasdaq National Market. On March 10, 2006, the fair market value per share of the Company's Common
Stock determined on such basis was $53.06.
Stockholder Rights and Transferability. No optionee will have any stockholder rights with respect to
the option shares until such optionee has exercised the option and paid the exercise price for the purchased
shares. The holder of a stock appreciation right will not have any stockholder rights with respect to the shares
subject to that right unless and until such person exercises the right and becomes the holder of record of any
shares of the Company's Common Stock distributed upon such exercise. Options are not assignable or
transferable other than by will or the laws of inheritance following the optionee's death, and during the
optionee's lifetime, the option may only be exercised by the optionee. However, the plan administrator may
structure one or more non-statutory options under the 2005 Plan so that those options will be transferable
during optionee's lifetime to one or more members of the optionee's family or to a trust established for the
optionee and/or one or more such family members or to the optionee's former spouse, to the extent such
transfer is in connection with the optionee's estate plan or pursuant to a domestic relations order. Stand alone
stock appreciation rights will be subject to the same transferability restrictions applicable to non-statutory
options.
A participant will have certain stockholder rights with respect to the shares of Common Stock issued to
him or her under the 2005 Plan, whether or not his or her interest in those shares is vested. Accordingly, the
participant will have the right to vote such shares and to receive dividends paid on such shares, but will not
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