SanDisk 2014 Annual Report Download - page 27

All Non-Employee Directors are also reimbursed for out-of-pocket expenses they incur serving as
Directors and as committee members.
Share-Based Awards
Under the Company’s Non-Employee Director compensation policy, as currently in effect, a
Non-Employee Director who first takes office and who has not been employed by the Company in the
preceding twelve (12) months receives (i) an initial option grant (the ‘‘Initial Option Grant’’) to purchase
that number of shares of Common Stock that results from multiplying the shares subject to the Annual
Option (as defined below) by the Initial Service Term (as defined below) and (ii) an initial RSU grant for a
number of units determined by multiplying the shares subject to the Annual RSU (as defined below) by the
Initial Service Term (the ‘‘Initial Unit Grant’’). The ‘‘Initial Service Term’’ means a fraction with the
numerator being the number of days from the date of appointment to the Board until the next scheduled
Annual Meeting of Stockholders or, if no Annual Meeting of Stockholders has been scheduled, the
one-year anniversary of the previous Annual Meeting of Stockholders, and the denominator being 365. In
addition, on the date of each Annual Meeting of Stockholders, each Non-Employee Director who has been
elected or re-elected at such Annual Meeting of Stockholders also receives (i) the Annual Option Grant,
and (ii) an RSU grant for a number of units determined by dividing $125,000 by the average closing price
per share of Common Stock on NASDAQ for the five (5) trading days ended on, and including, the grant
date (the ‘‘Annual Unit Grant’’). The initial and annual awards described in this paragraph are granted
under, and are subject to, the Company’s 2013 Incentive Plan (the ‘‘2013 Plan’’).
Initial and Annual Stock Option Grants. The Initial and Annual Option Grants are granted with a per
share exercise price equal to the fair market value of a share of Common Stock on the grant date. For
these purposes, and in accordance with the terms of the 2013 Plan and the Company’s share-based award
grant practices, the fair market value is equal to the closing price of a share of the Common Stock on
NASDAQ on the grant date.
The stock options granted to Non-Employee Directors are immediately exercisable. However, upon a
Non-Employee Director’s cessation of service with the Company, any shares purchased upon exercise of
the option that have not vested (as described below) are subject to repurchase by the Company at the
lower of (i) the exercise price paid for the shares or (ii) the fair market value of the shares at the time of
repurchase (as determined under the 2013 Plan). This type of stock option is generally referred to as an
‘‘early exercise’’ stock option because the holder is permitted to exercise the option prior to the time that
the underlying shares vest. Subject to the Non-Employee Director’s continued service, the shares subject to
the Initial Option Grant and the Annual Option Grant vest, and the Company’s repurchase right lapses, in
one installment on the earlier of (i) first anniversary of the grant date or (ii) the day immediately preceding
the next Annual Meeting of Stockholders following the grant date.
Once vested, each option will generally remain exercisable for fully vested shares of Common Stock
(i.e., shares which are not subject to the Company’s repurchase right) until its normal expiration date. Each
of the options granted to the Company’s Non-Employee Directors, under the 2013 Plan, has a term of
seven (7) years. However, vested stock options may terminate earlier in connection with a change in
control of the Company. Pursuant to the terms of the 2013 Plan, stock options granted to the Company’s
Non-Employee Directors will vest on an accelerated basis in connection with a change in control of the
Company. Shares subject to the option that have not vested will immediately terminate (or be subject to
the Company’s repurchase right to the extent already purchased under the option) upon the cessation of
the Non-Employee Director’s service. However, the shares subject to options vest, and the Company’s
repurchase right lapses, in full if the Non-Employee Director’s cessation of service is as a result of the
Director’s death or permanent disability. Non-Employee Directors generally have twelve (12) months to
exercise the vested portion of the option following a cessation of service.
19
Proxy Statement