SanDisk 2006 Annual Report Download - page 38

“Potential Payments Upon Termination or Change in Control.” The Company provides Named Executive
Officers with certain perquisites and personal benefits not included in this table pursuant to SEC rules.
(5) The following awards previously granted to Mr. Chan were forfeited in connection with the termination of
Mr. Chan’s employment with the Company effective December 8, 2006: (i) of the 250,000 options granted to
Mr. Chan on January 16, 2004, 15,626 unvested options were forfeited; (ii) of the 50,000 options granted to
Mr. Chan on August 12, 2004, 9,375 unvested options were forfeited; (iii) of the 150,000 options granted to
Mr. Chan on January 3, 2005, 46,875 unvested options were forfeited; (iv) of the 80,000 options granted to
Mr. Chan on February 16, 2006, 45,000 unvested options were forfeited; and (v) of the 50,000 restricted stock
units granted to Mr. Chan on February 16, 2006, 37,500 unvested units were forfeited.
Dr. Harari is the Chairman of the Board of Directors. As an employee-director, Dr. Harari does not receive
additional compensation for his services as a director.
Compensation of Named Executive Officers
The Summary Compensation Table — Fiscal 2006 above quantifies the value of the different forms of
compensation earned by or awarded to our Named Executive Officers in fiscal 2006. The primary elements of each
Named Executive Officer’s total compensation reported in the table are base salary, an annual bonus and long-term
equity incentives consisting of stock options and restricted stock units. Named Executive Officers also earned or
were paid the other benefits listed in column (i) of the Summary Compensation Table — Fiscal 2006, as further
described in footnote (4) to the table.
The Summary Compensation Table — Fiscal 2006 should be read in conjunction with the tables and narrative
descriptions that follow. A description of the material terms of each Named Executive Officer’s base salary and
annual bonus is provided immediately following this paragraph. The Grants of Plan-Based Awards in Fiscal 2006
table, and the description of the material terms of the stock options and restricted stock units granted in fiscal 2006
that follows it, provides information regarding the long-term equity incentives awarded to Named Executive
Officers in fiscal 2006. The Outstanding Equity Awards at Fiscal 2006 Year-End and Option Exercises and Stock
Vested in Fiscal 2006 tables provide further information on the Named Executive Officers’ potential realizable
value and actual value realized with respect to their equity awards. The discussion of the potential payments due
upon a termination of employment or change in control that follows is intended to further explain the potential
future payments that are, or may become, payable to our Named Executive Officers under certain circumstances.
Description of Employment Agreements, Salary and Bonus Amounts
As indicated above, none of the Named Executive Officers is employed pursuant to an employment agreement.
As a result, their base salary and bonus opportunities are not fixed by contract. Instead, in the first quarter of each
fiscal year, the Compensation Committee establishes the base salary level for each of our Named Executive Officers
for the year. In making its determination, the Compensation Committee considers the factors discussed above under
“Current Executive Compensation Program Elements — Base Salaries.” In fiscal 2006, instead of granting
discretionary cash bonuses, the Company granted Named Executive Officers a cash incentive award under the
2005 Plan. In determining the terms of such awards, the Compensation Committee considered the factors discussed
above under “Current Executive Compensation Program Elements - Annual Cash Incentive Award.” The material
terms of the cash incentive awards granted to each Named Executive Officer in fiscal 2006 are described below
under “Description of Plan-Based Awards.”
Consistent with the Company’s philosophy that a substantial portion of compensation should be contingent on
the Company’s performance, base salary for Named Executive Officers in fiscal 2006 comprised a relatively low
percentage (generally between 8% and 12%) of total compensation. Equity and non-equity incentive compensation
for Named Executive Officers in fiscal 2006, the value of which, as described below under “Description of Plan-
Based Awards”, is significantly dependent upon on Company performance, comprised a much larger percentage
(generally between 88% and 92%) of total compensation. The Company believes this allocation of base salary and
incentive compensation in proportion to total compensation is appropriate to balance the Company’s dual goals of
aligning the interests of executives and stockholders and providing predictable benefit amounts that reward an
executive’s continued service.
Proxy Statement
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