SanDisk 2011 Annual Report Download - page 47

Proxy Statement
employees. However, there is no formal program, plan or policy in place at the Company or in the Compensation
Committee’s charter with respect to the timing of long-term share-based incentive award grants, except as set
forth below with respect to grants to new employees and related to promotions and retention. The Compensation
Committee has complete discretion as to when it awards long-term share-based incentive awards. There is also
no program, plan or policy related to the timing of grants to the executive officers in coordination with the
release of material nonpublic information. Long-term share-based incentive awards granted to new hires or to
promoted employees occur after the new hire has joined the Company or, in the case of a promoted employee,
after the promotion has been approved. For a newly hired or promoted executive officer, the associated stock
award is granted at the next meeting of the Compensation Committee. For a newly hired or promoted employee
who is not an executive officer, the associated stock award is granted by the Company’s Special Option
Committee or Secondary Executive Committee which generally takes actions every Friday.
Stock Options. The Compensation Committee grants a portion of the long-term share-based incentive
awards to the executive officers, including the Named Executive Officers, in the form of stock options with an
exercise price that is equal to the fair market value of the closing price of the Common Stock on the grant date.
Thus, the Named Executive Officers will only realize value on their stock options if the Company’s stockholders
realize value on their shares. The stock options also function as a retention incentive for the Company’s
executive officers as they vest over a four (4) year period following the grant date. In fiscal 2011, the
Compensation Committee granted stock options to each of the Named Executive Officers. The material terms of
these stock options granted in fiscal 2011 to the Named Executive Officers are described below under “Grants of
Plan-Based Awards in Fiscal 2011.”
Restricted Stock Units. The Compensation Committee grants a portion of the long-term share-based
incentive awards to the executive officers, including the Named Executive Officers, in the form of restricted
stock units. A restricted stock unit represents a contractual right to receive one share of Common Stock if the
applicable vesting requirements are satisfied. The Company has determined that it is advisable to grant restricted
stock units in addition to stock options (and in lieu of larger stock option grants) in order to minimize stock
expense to the Company and dilution to stockholders. In certain countries the Company utilizes restricted stock
units instead of stock options due to certain international tax and securities regulations. Restricted stock units
granted in fiscal 2011 also function as a retention incentive as they vest over four (4) years following the grant
date. In fiscal 2011, the Compensation Committee granted restricted stock units subject to such time-based
vesting to each of the Named Executive Officers. The material terms of these restricted stock units granted in
fiscal 2011 to the Named Executive Officers are described below under “Grants of Plan-Based Awards in Fiscal
2011.”
401(k) Retirement Benefits
The Company provides a retirement benefit opportunity to its executive officers, including the Named
Executive Officers, under the terms of its tax-qualified 401(k) plan. In fiscal 2011, the Company made a
discretionary matching contribution on behalf of each participant equal to one-half of the first 6% of
compensation contributed to the plan by the participant. The Named Executive Officers participate in the plan on
the same terms as the Company’s other participating employees. The Company does not maintain any other
deferred compensation (including nonqualified deferred compensation), defined benefit or supplemental
retirement plans for its Named Executive Officers.
Severance and Other Benefits Upon Termination of Employment or Change in Control
In order to achieve the Company’s compensation objective of attracting, retaining and motivating qualified
executive officers, the Company believes that it needs to provide the executive officers with severance
protections that are consistent with the severance protections offered by its peer companies. The Company’s
philosophy is that a contractual right to severance pay should exist for certain executive officers, including the
Named Executive Officers, only upon certain terminations of employment in connection with a change in control
of the Company, and for the Chief Executive Officer, upon certain other terminations of employment.
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