SanDisk 2006 Annual Report Download - page 24

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We also believe that time-vesting stock options and restricted stock units are forms of incentive compensation
that are inherently performance-based, since their eventual value to the recipient is directly linked to our stock price,
which is largely driven by company performance. The Company’s 2005 Incentive Plan, which was originally
approved by stockholders at the 2005 Annual Meeting of Stockholders, and which was amended with the approval
of our stockholders at our 2006 Annual Meeting of Stockholders to increase the number of shares of Common Stock
reserved for issuance thereunder, provides us additional flexibility in making awards to senior executives by
allowing the use of not only time and performance-vesting stock options, restricted stock and restricted stock units,
but also stock appreciation rights. Our Compensation Committee has used a mix of both stock options and restricted
stock units as long-term equity incentives for our senior executives when it deemed such rewards to be in the best
interests of the Company and its stockholders.
We acknowledge that performance-vesting awards have become more popular in recent years and that these
types of awards can be useful in certain circumstances. In fiscal 2007 and beyond, the Compensation Committee
may consider these types of equity incentive tools among the various alternatives for long-term equity incentive
compensation. However, we believe that it is in the best interests of our stockholders to allow the Compensation
Committee the flexibility and discretion to use and introduce all available compensation and equity incentive tools
as appropriate, based on the circumstances and information available at the time. This stockholder proposal would
unduly limit the Compensation Committee’s flexibility by requiring that a significant portion of equity compen-
sation be in one particular form.
Recommendation of the Board of Directors
For the reasons set forth above, the Board believes that Proposal No. 3 is not in the Company’s best
interests or the best interests of its stockholders and recommends a vote AGAINST Proposal No. 3.
Proxy Statement
17