SanDisk 2005 Annual Report Download - page 57

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exercisable as Incentive Options during any one calendar year shall not exceed the sum of One Hundred
Thousand Dollars ($100,000).
To the extent the Employee holds two (2) or more such options which become exercisable for the first
time in the same calendar year, then for purposes of the foregoing limitations on the exercisability of those
options as Incentive Options, such options shall be deemed to become first exercisable in that calendar year on
the basis of the chronological order in which they were granted, except to the extent otherwise provided under
applicable law or regulation.
C. 10% Stockholder. If any Employee to whom an Incentive Option is granted is a 10% Stockholder,
then the exercise price per share shall not be less than one hundred ten percent (110%) of the Fair Market
Value per share of Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
III. STOCK APPRECIATION RIGHTS
A. Authority. The Plan Administrator shall have full power and authority, exercisable in its sole
discretion, to grant stock appreciation rights in accordance with this Section III to selected Optionees or other
individuals eligible to receive option grants under the Discretionary Grant Program.
B. Types. Two types of stock appreciation rights shall be authorized for issuance under this Section III:
(i) tandem stock appreciation rights (""Tandem Rights'') and (ii) stand-alone stock appreciation rights
(""Stand-alone Rights'').
C. Tandem Rights. The following terms and conditions shall govern the grant and exercise of Tandem
Rights.
1. One or more Optionees may be granted a Tandem Right, exercisable upon such terms and conditions
as the Plan Administrator may establish, to elect between the exercise of the underlying option for shares of
Common Stock or the surrender of that option in exchange for a distribution from the Corporation in an
amount equal to the excess of (i) the Fair Market Value (on the option surrender date) of the number of
shares in which the Optionee is at the time vested under the surrendered option (or surrendered portion
thereof) over (ii) the aggregate exercise price payable for such vested shares.
2. No such option surrender shall be effective unless it is approved by the Plan Administrator, either at
the time of the actual option surrender or at any earlier time. If the surrender is so approved, then the
distribution to which the Optionee shall accordingly become entitled under this Section III shall be made in
shares of Common Stock valued at Fair Market Value on the option surrender date.
3. If the surrender of an option is not approved by the Plan Administrator, then the Optionee shall retain
whatever rights the Optionee had under the surrendered option (or surrendered portion thereof) on the option
surrender date and may exercise such rights at any time prior to the later of (i) five (5) business days after the
receipt of the rejection notice or (ii) the last day on which the option is otherwise exercisable in accordance
with the terms of the instrument evidencing such option, but in no event may such rights be exercised more
than seven (7) years after the date of the option grant.
D. Stand-Alone Rights. The following terms and conditions shall govern the grant and exercise of
Stand-alone Rights:
1. One or more individuals eligible to participate in the Discretionary Grant Program may be
granted a Stand-alone Right not tied to any underlying option under this Discretionary Grant Program.
The Stand-alone Right shall relate to a specified number of shares of Common Stock and shall be
exercisable upon such terms and conditions as the Plan Administrator may establish. In no event,
however, may the Stand-alone Right have a maximum term in excess of seven (7) years measured from
the grant date. Upon exercise of the Stand-alone Right, the holder shall be entitled to receive a
distribution from the Corporation in an amount equal to the excess of (i) the aggregate Fair Market
Value (on the exercise date) of the shares of Common Stock underlying the exercised right over (ii) the
aggregate base price in effect for those shares.
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