SanDisk 2007 Annual Report Download - page 118

Off-Balance Sheet Risk. The Company has off-balance sheet financial obligations. See Note 12, “Com-
mitments, Contingencies and Guarantees.”
Note 8: Compensation and Benefits
Share-Based Benefit Plans
2005 Incentive Plan. In May 2005, the Company’s board of directors adopted the 2005 Stock Incentive Plan,
which was amended in May 2006 and renamed the 2005 Incentive Plan (“2005 Plan”). Shares of the Company’s
common stock may be issued under the 2005 Plan pursuant to three separate equity incentive programs: (i) the
discretionary grant program under which stock options and stock appreciation rights may be granted to officers and
other employees, non-employee board members and independent consultants, (ii) the stock issuance program under
which shares may be awarded to such individuals through restricted stock or restricted stock unit awards or as a
stock bonus for services rendered to the Company, and (iii) an automatic grant program for the non-employee board
members pursuant to which such individuals will receive option grants or other stock awards at designated intervals
over their period of board service. The 2005 Plan also includes a performance-based cash bonus awards program for
employees classified under Section 16. Grants and awards under the discretionary grant program generally vest as
follows: 25% of the shares will vest on the first anniversary of the vesting commencement date and the remaining
75% will vest proportionately each quarter over the next 36 months of continued service. Awards under the stock
issuance program generally vest in equal annual installments over a 4-year period. Grants under the automatic grant
program will vest in accordance with the specific vesting provisions set forth in that program. A total of
21,850,877 shares of the Company’s common stock have been reserved for issuance under this plan. The share
reserve may increase by up to an additional 10,000,000 shares of common stock to the extent that outstanding
options under the 1995 Stock Option Plan and the 1995 Non-Employee Directors Stock Option Plan expire or
terminate unexercised, of which as of December 30, 2007, 1,150,877 shares of common stock has been added to the
2005 Plan reserve. All options granted under the 2005 Plan were granted with an exercise price equal to the fair
market value of the common stock on the date of grant and will expire seven years from the date of grant. Through
December 30, 2007, awards to purchase a total of 12,526,531 shares of common stock were granted to employees
under the 2005 Plan, net of cancellations. For years ended December 30, 2007 and December 31, 2006, awards of
4,738,804 and 6,103,534 shares of common stock, respectively, were granted to employees under the 2005 Plan, net
of cancellations.
1995 Stock Option Plan and 1995 Non-Employee Directors Stock Option Plan. Both of these plans
terminated on May 27, 2005, and no further option grants were made under the plans after that date. However,
options that were outstanding under these plans on May 27, 2005 will continue to be governed by their existing
terms and may be exercised for shares of the Company’s common stock at any time prior to the expiration of the ten-
year option term or any earlier termination of those options in connection with the optionee’s cessation of service
with the Company. Grants and awards under these plans generally vest as follows: 25% of the shares will vest on the
first anniversary of the vesting commencement date and the remaining 75% will vest proportionately each quarter
over the next 36 months of continued service. As of December 30, 2007, options had been granted, net of
cancellations, to purchase 37,947,162 and 1,616,000 shares of common stock under the 1995 Stock Option Plan and
the 1995 Non-Employee Directors Stock Option Plan, respectively.
2005 Employee Stock Purchase Plan. The 2005 Employee Stock Purchase Plan (“ESPP”), was approved by
the stockholders on May 27, 2005. The ESPP plan consists of two components: a component for employees residing
in the United States and an international component for employees who are non-United States residents. The ESPP
plan allows eligible employees to purchase shares of the Company’s common stock at the end of each six-month
offering period at a purchase price equal to 85% of the lower of the fair market value per share on the start date of the
offering period or the fair market value per share on the purchase date. The ESPP plan had an original authorization
of 5,000,000 shares to be issued, of which 4,349,035 shares were available to be issued as of December 30, 2007. In
the fiscal years ended December 30, 2007 and December 31, 2006, a total of 385,989 and 264,976 shares of
common stock, respectively, have been issued under this plan.
F-22
Notes to Consolidated Financial Statements — (Continued)