SanDisk 2014 Annual Report Download - page 46

and, with the exception of Mr. Mehrotra’s agreement, provide for a severance payment of one and one-half
times the annual base salary and target bonus, as well as eighteen (18) months of Company-paid medical
insurance, in the event of a Qualifying Termination. Under Mr. Mehrotra’s change in control agreement in
effect through December 31, 2014, in the event of a Qualifying Termination, the severance payment is two
times his annual base salary and target bonus and his entitlement to Company-paid medical insurance is
for twenty-four (24) months. On December 21, 2014, the Company entered into a new change in control
agreement with Mr. Mehrotra, effective as of January 1, 2015, pursuant to which, in the event of a
Qualifying Termination, the severance payment is three times his annual base salary and target bonus and
his entitlement to Company-paid medical insurance is for twenty-four (24) months.
As discussed under ‘‘Annual Bonus Awards’’ and ‘‘Subsequent Committee Actions,’’ the
Compensation Committee has established a target bonus percentage for each Named Executive Officer.
Severance payments under the change in control agreements are based on these target bonus percentages
as in effect for the calendar year in which the change in control occurs, regardless of actual performance
and regardless of whether the Compensation Committee had the discretion to award a lower bonus or no
bonus. The Company believes that the use of target bonuses for this purpose is appropriate to provide
certainty to the executive officers and to avoid disputes concerning the calculation of severance payments.
The change in control agreements with the Named Executive Officers also provide certain other
severance protections, such as (i) accelerated vesting of outstanding equity awards (with accelerated
options to remain exercisable for twelve (12) months following termination, subject to the maximum term
of the option); and (ii) executive outplacement benefits for twelve (12) months following termination
(including resume assistance, career evaluation and assessment, individual career counseling, access to one
or more on-line employment databases, and administrative support). Similar to cash severance benefits,
the Company believes these other severance benefits are consistent with the severance arrangements of the
Company’s peer companies and provide the Named Executive Officers with financial and personal security
during a period of time when they are likely to be unemployed.
Please see ‘‘Potential Payments Upon Termination or Change in Control’’ below for a description of
the potential payments that may be made to the Named Executive Officers in connection with their
termination of employment or a change in control.
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 year 2014, 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.
Subsequent Committee Actions
In February 2015, the Compensation Committee established performance targets and a maximum
individual bonus payout amount in connection with the Company’s fiscal year 2015 annual cash incentive
program (the ‘‘2015 bonus program’’) for the executive officers including the Named Executive Officers.
The performance targets under the 2015 bonus program relate to a non-GAAP EPS goal and certain
strategic objectives, the attainment of which the Compensation Committee will evaluate following the end
of fiscal year 2015. For fiscal year 2015, based on the factors discussed above under ‘‘Base Salaries,’’ the
Compensation Committee set the fiscal year 2015 base salaries of the Named Executive Officers, with the
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