SanDisk 2008 Annual Report Download - page 93

Notes to Consolidated Financial Statements
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.
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 U.S. and an international component for employees who are non-U.S. 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 3,392,848 shares were available to be issued as of
December 28 2008. In the fiscal years ended December 28, 2008, December 30, 2007 and December 31, 2006, a
total of 956,187, 385,989 and 264,976 shares of common stock, respectively, have been issued under this plan.
msystems Ltd. 1996 Section 102 Stock Option/Stock Purchase Plan and 2003 Stock Option and Restricted
Stock Incentive Plan. The msystems Ltd. 1996 Section 102 Stock Option/Stock Purchase Plan and 2003 Stock
Option and Restricted Stock Incentive Plan acquired through the Company’s acquisition of msystems Ltd.
(“msystems”), were terminated on November 19, 2006, and no further grants were made under these plans after
that date. However, award grants that were outstanding under these plans on November 19, 2006 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. Awards granted under these plans generally vest as
follows: 50% of the shares will vest on the second anniversary of the vesting commencement date and the
remaining 50% will vest proportionately each quarter over the next 24 months of continued service.
Matrix Semiconductor, Inc. 2005 Stock Incentive Plan, 1999 Stock Plan and 1998 Long-term Incentive
Plan. The Matrix Semiconductor, Inc. 2005 Stock Incentive Plan, 1999 Stock Plan and the Rhombus, Inc. 1998
Long-term Incentive Plan (“Matrix Stock Plans”), acquired through SanDisk’s acquisition of Matrix
Semiconductor, Inc. (“Matrix”), were terminated on January 13, 2006, and no further option grants were made
under these plans after that date. However, award grants that were outstanding under these plans on
January 13, 2006 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. Awards
granted under these plans generally vest as follows: 1/48 of the shares will vest proportionately each month over
the next 48 months of continued service or 1/60 of the shares will vest proportionately each month over the next
60 months of continued service.
Adoption of SFAS 123(R)
Effective January 2, 2006, the Company adopted the fair value recognition provisions of Statement of
Financial Accounting Standards No. 123(R) (“SFAS 123(R)”), Share-Based Payment, using the modified-
prospective transition method, and therefore, has not restated its financial statements for prior periods. For
awards expected to vest, compensation cost includes the following: (a) compensation cost, based on the grant-
date estimated fair value and expense attribution method under Statement of Financial Accounting Standards
No. 123 (“SFAS 123”), Accounting for Stock-Based Compensation, related to any share-based awards granted
through, but not yet vested as of January 1, 2006, and (b) compensation cost for any share-based awards granted
on or subsequent to January 2, 2006, based on the grant-date fair value estimated in accordance with the
provisions of SFAS 123(R). The Company recognizes compensation expense for the fair values of these awards,
which have graded vesting, on a straight-line basis over the requisite service period of each of these awards, net
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