SanDisk 2012 Annual Report Download - page 35

Proxy Statement
The Compensation Committee and the Board are making this recommendation on the basis of managing the
Company’s future burn rate to remain below the median burn rate of the Company’s peer companies and the burn
rate guidelines recommended by independent shareholder proxy advisory groups, consistent with its historical
practice. Based on these considerations and a sensitivity to minimize the impact of potential dilution that awards
under the 2013 Plan could have on our stockholders, the Compensation Committee and the Board believe that the
20,000,000 shares for which stockholder approval is being sought represents an appropriate initial reservation of
Common Stock at this time.
For the purposes of this proxy statement, we define “issued overhang” as the total equity awards issued and
outstanding at the end of the fiscal year, divided by the total shares of Common Stock outstanding at the end of
the fiscal year. The overhang measures the potential dilutive effect of outstanding equity awards. The overhang
percentages presented in this proxy statement do not include shares that remain available for future grant under
equity plans in order to provide for comparability of the Company’s data with that of its peer companies, since
there may be significant variation in the “life” of existing equity plans across the peer companies.
The Compensation Committee reviewed the Company’s peer companies (further discussed below under
“Compensation Discussion & Analysis”) to evaluate the Company’s overhang. The Company’s overhang
percentage in recent years has approximated or been below the median overhang percentage of its peer
companies.
Fiscal Year End
Total Options
Issued and
Outstanding
Total RSUs
Issued and
Outstanding
Shares Available
for Grant
SanDisk Issued
Overhang
Peer Companies
Median Issued
Overhang
2012 ................... 15,424,936 3,076,506 10,392,323 7.8% N/A(1)
2011 ................... 17,556,136 2,050,666 13,365,242 8.1% 9.3%
2010 ................... 20,393,234 1,243,626 8,130,900 9.0% 8.9%
(1) Peer companies median issued overhang data for fiscal year 2012 was not yet available as of the date of this
proxy statement.
The 2013 Plan Conforms to Best Practices
The 2013 Plan shares many of the same best practices as the 2005 Plan, as follows:
• Sets a fixed number of shares authorized for issuance, which will require the Company to seek specific
stockholder approval for any future increases in the shares available for issuance under the 2013 Plan.
• Requires that stock options and stock appreciation rights must be granted with an exercise price of at
least 100% of the fair market value of the option shares on the grant date.
• Prohibits equity award repricing without stockholder approval;
• Does not permit options to be granted with a term exceeding seven (7) years;
• Deducts the shares available for issuance under the 2013 Plan by the gross number of shares for which
an award is exercised or vests, not the net number of shares actually issued upon exercise (in the event
the exercise price is paid in shares of the Company’s Common Stock or shares are withheld to satisfy
tax withholding obligations); and
• Does not provide for the automatic full acceleration of outstanding equity awards in the event of a
change in control if such equity awards are assumed by the successor corporation.
The Company Has an Active Stock Repurchase Program
On October 27, 2011, the Company announced a Board-approved plan authorizing the Company to
repurchase up to $500 million of Common Stock in the open market or otherwise (the “Repurchase Plan”). On
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