Table of Contents
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrantý
Filed by a Party other than the Registrant¨
Check the appropriate box:
¨ | Preliminary Proxy Statement | ¨ | Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |||
ý | Definitive Proxy Statement | |||||
¨ | Definitive Additional Materials | |||||
¨ | Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 |
SANDISK CORPORATION
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
(1) Title of each class of securities to which transaction applies:
(1) Amount previously paid:
Table of Contents
Sincerely yours, | |
![]() | |
Eli Harari | |
President and Chief Executive Officer |
Table of Contents
1. To elect six (6) directors to serve for the ensuing year or until their respective successors are duly elected and qualified. The nominees are Dr. Eli Harari, Irwin Federman, Catherine P. Lego, Michael E. Marks, Dr. James D. Meindl and Alan F. Shugart. | |
2. To approve the implementation of the SanDisk Corporation 2005 Stock Incentive Plan. | |
3. To approve the implementation of the SanDisk Corporation 2005 Employee Stock Purchase Plan and the SanDisk Corporation 2005 International Employee Stock Purchase Plan, which will share a common share reserve of the Company’s common stock. | |
4. To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending January 1, 2006. | |
5. To transact such other business as may properly come before the meeting or any adjournment or postponement thereof. |
Table of Contents
By Order of the Board of Directors | |
![]() | |
Eli Harari | |
President and Chief Executive Officer |
Table of Contents
Table of Contents
2
Table of Contents
First Elected/Appointed | ||||||||||
Name | Position(s) with the Company | Age | As a Director | |||||||
Dr. Eli Harari(3) | President, Chief Executive Officer and Director | 59 | 1988 | |||||||
Irwin Federman(1) | Chairman of the Board and Director | 69 | 1988 | |||||||
Catherine P. Lego(1) | Director | 48 | 2004 | (5) | ||||||
Michael E. Marks(2)(4) | Director | 54 | 2003 | |||||||
Dr. James D. Meindl(2) | Director | 71 | 1989 | |||||||
Alan F. Shugart(1)(2)(4) | Director | 74 | 1993 |
(1) | Member of the Audit Committee |
(2) | Member of the Compensation Committee |
(3) | Member of the Special Option Committee |
(4) | Member of the Nominating and Corporate Governance Committee |
(5) | Ms. Lego served as a director of the Company from 1989 to 2002 and returned to the Board of Directors in May, 2004 |
3
Table of Contents
4
Table of Contents
Postal Mail |
Individuals may also communicate with the Board by submitting an email to the Company’s Board at BOD@sandisk.com. Email submitted to this email address will be relayed to all directors. |
Communications Intended for Non-Management Directors |
Communications that are intended specifically for non-management directors should be sent to the postal or email address above to the attention of the Chair of the Nominating and Corporate Governance Committee. |
5
Table of Contents
6
Table of Contents
• | Reputation for integrity, strong moral character and adherence to high ethical standards. | |
• | Holds or has held a generally recognized position of leadership in the community and/or chosen field of endeavor, and has demonstrated high levels of accomplishment. | |
• | Demonstrated business acumen and experience, and ability to exercise sound business judgment in matters that relate to the current and long-term objectives of the Company. | |
• | Ability to read and understand basic financial statements and other financial information pertaining to the Company. | |
• | Commitment to understand the Company and its business, industry and strategic objectives. | |
• | Commitment and ability to regularly attend and participate in meetings of the Board of Directors, Board Committees and stockholders, number of other company boards on which the candidate serves and ability to generally fulfill all responsibilities as a director of the Company. | |
• | Willingness to represent and act in the interests of all stockholders of the Company rather than the interests of a particular group. | |
• | Good health, and ability to serve. | |
• | For prospective non-employee directors, independence under SEC and applicable stock exchange rules, and the absence of any conflict of interest (whether due to a business or personal relationship) or legal impediment to, or restriction on, the nominee serving as a director. | |
• | Willingness to accept the nomination to serve as a director of the Company. |
Other Factors for Potential Consideration |
The Nominating and Corporate Governance Committee will also consider the following factors in connection with its evaluation of each prospective nominee: |
• | Whether the prospective nominee will foster a diversity of skills and experiences. | |
• | Whether the nominee possesses the requisite education, training and experience to qualify as “financially literate” or as an “audit committee financial expert” under applicable SEC and stock exchange rules. | |
• | For incumbent directors standing for re-election, the Nominating and Corporate Governance Committee will assess the incumbent director’s performance during his or her term, including the number of |
7
Table of Contents
meetings attended, level of participation, and overall contribution to the Company; the number of other company boards on which the individual serves, the composition of the Board at that time, and any changed circumstances affecting the individual director which may bear on his or her ability to continue to serve on the Board. | ||
• | Composition of Board and whether the prospective nominee will add to or complement the Board’s existing strengths. |
• | Outside Advisors. The Nominating and Corporate Governance Committee may engage a third-party search firm or other advisors to assist in identifying prospective nominees. | |
• | Nomination of Incumbent Directors. The re-nomination of existing directors is not automatic, but is based on continuing qualification under the criteria set forth above. | |
• | Management Directors. The number of officers or employees of the Company serving at any time on the Board should be limited such that, at all times, a majority of the directors is “independent” under applicable SEC and Nasdaq National Market rules. |
8
Table of Contents
9
Table of Contents
(i) The new plan will include a stock issuance program under which shares of our Common Stock may be issued at not less than their fair market value for cash or other valid consideration under Delaware law. Shares may also be issued as a bonus for past services or pursuant to restricted stock units or other stock-based awards which vest upon the attainment of designated performance goals or the completion of specified service periods and become payable either upon vesting or at a designated time thereafter. However, the maximum number of shares which may be issued without cash consideration under the stock issuance program (whether as direct stock issuances or pursuant to restricted stock units or share-right awards) may not exceed ten percent (10%) of the total number of shares of Common Stock from time to time authorized for issuance under the 2005 Plan, including (without limitation): (i) any shares added to the 2005 Plan reserve by reason of the expiration or termination of outstanding options under the 1995 Plan or the Directors Plan prior to exercise, (ii) any increases to the reserve under the 2005 Plan approved by our stockholders and (iii) any adjustments to the share reserve by reason of stock dividends, stock splits or similar transactions affecting our outstanding Common Stock. | |
(ii) Stock appreciation rights will also be issuable under the 2005 Plan. Such rights will entitle the holders to a distribution from us equal in value to the amount by which the fair market value of the shares as to which those rights are exercised, measured as of the exercise date, exceeds the fair market value of those shares at the time the rights were granted. The distribution will be made in shares of our Common Stock. | |
(iii) Stock options may not be granted under the 2005 Plan with an exercise price less than the fair market value of our Common Stock on the grant date. Under the 1995 Plan, options could be granted with an exercise price equal to eighty-five percent (85%) of such fair market value. |
10
Table of Contents
(iv) Stock options and stock appreciation rights granted under the 2005 Plan will not have a term in excess of seven (7) years. Options granted under the 1995 Plan have typically had a maximum term of ten (10) years. | |
(v) The new plan willnothave an automatic share increase feature. Under the 1995 predecessor plan, the share reserve automatically increased on the first trading day in January each calendar year by an amount equal to 4.36% of the total number of shares of Common Stock outstanding on the immediately preceding trading day, subject to an annual limit of 4,000,000 shares. | |
(vi) The new plan includes an automatic grant program for our non-employee board members pursuant to which they will receive option grants or other stock-based awards at designated intervals over their period of continued board service. This program will replace our Directors Plan, and no further option grants will be made under that plan if the new 2005 Plan is approved by the stockholders at the Annual Meeting. | |
(vii) Performance criteria have been incorporated into the 2005 Plan which will allow the plan administrator to structure one or more stock issuances or other stock-based awards so that the compensation attributable to those particular awards will qualify as performance-based compensation under Internal Revenue Code Section 162(m). | |
(viii) The 2005 Plan will not permit the repricing of any stock options or stock appreciation rights outstanding under that plan. | |
(ix) Unless sooner terminated by our board of directors or in connection with a change in control or ownership, the 2005 Plan will continue in effect until March 15, 2015. | |
(x) Individuals will not have any right to exercise their options or otherwise acquire shares under the 2005 Plan by delivering promissory notes. |
11
Table of Contents
• | Should the exercise price of an option be paid in shares of our Common Stock, then the number of shares reserved for issuance under the 2005 Plan will be reduced by the gross number of shares for which that option is exercised, and not by the net number of new shares issued under the exercised option. |
12
Table of Contents
• | Should shares of Common Stock otherwise issuable under the 2005 Plan be withheld by us in satisfaction of the withholding taxes incurred in connection with the exercise of an option or stock appreciation right or the issuance of fully-vested shares under the stock issuance program, then the number of shares of Common Stock available for issuance under the 2005 Plan will be reduced by the full number of shares issuable under the exercised option or stock appreciation right or the full number of fully-vested shares issuable under the stock issuance program, calculated in each instance prior to any such share withholding. | |
• | Upon the exercise of any stock appreciation right granted under the 2005 Plan, the share reserve will be reduced by the gross number of shares as to which such stock appreciation right is exercised, and not by the net number of shares actually issued upon such exercise. |
• | Tandem stock appreciation rights provide the holders with the right to surrender their options for an appreciation distribution from us in an amount equal to the excess of (i) the fair market value of the vested shares of our Common Stock subject to the surrendered option over (ii) the aggregate exercise price payable for those shares. | |
• | Stand-alone stock appreciation rights allow the holders to exercise those rights as to a specific number of shares of our Common Stock and receive in exchange an appreciation distribution from us in an amount equal to the excess of (i) the fair market value of the shares of Common Stock as to which those rights are exercised over (ii) the aggregate base price in effect for those shares. The base price per share may not be less than the fair market value per share of our Common Stock on the date the stand-alone stock appreciation right is granted, and the right may not have a term in excess of seven years. |
13
Table of Contents
14
Table of Contents
15
Table of Contents
Number of Shares | Weighted Average | |||||||||||
Underlying Options | Exercise Price | |||||||||||
Name and Position | Granted (#) | per Share ($) | ||||||||||
Named Executive Officers: | ||||||||||||
Eli Harari | President & CEO | 800,000 | (1) | 31.98 | ||||||||
Sanjay Mehrotra | Executive VP & COO | 675,000 | (2) | 28.47 | ||||||||
Judy Bruner | Executive VP, Administration & CFO | 575,000 | (3) | 21.00 | ||||||||
Nelson Chan | EVP & GM, Consumer & Handset Business | 450,000 | (4) | 29.63 | ||||||||
Michael Gray | Sr. VP, Finance & Administration & CFO | 100,000 | (5) | 34.59 | ||||||||
All current executive officers as a group (4 persons) | 2,500,000 | 28.09 | ||||||||||
Directors: | ||||||||||||
Irwin Federman | 32,000 | 22.90 | ||||||||||
Catherine P. Lego | 128,000 | 22.90 | ||||||||||
Michael E. Marks | 32,000 | 22.90 | ||||||||||
James D. Meindl | 32,000 | 22.90 | ||||||||||
Alan F. Shugart | 32,000 | 22.90 | ||||||||||
All current non-employee directors as a group (5 persons) | 256,000 | 22.90 | ||||||||||
All employees, including current officers who are not executive officers, as a group (approximately 965 persons) | 8,277,483 | (6) | 28.87 |
(1) | Consists of 600,000 option shares granted on 1/16/2004 at an exercise price of $34.585 and 200,000 option shares granted on 1/3/2005 at an exercise price of $24.18. |
(2) | Consists of 300,000 option shares granted on 1/16/2004 at an exercise price of $34.585, a promotional grant of 75,000 option shares granted on 8/12/2004 at an exercise price of $21.19 and 300,000 option shares granted on 1/3/2005 at an exercise price of $24.18. |
16
Table of Contents
(3) | Consists of 450,000 option shares granted in connection with Ms. Bruner’s commencement of employment with the Company on 6/21/2004 at an exercise price of $20.12 and 125,000 option shares granted on 1/3/2005 at an exercise price of $24.18. |
(4) | Consists of 250,000 option shares granted on 1/16/2004 at an exercise price of $34.585, a promotional grant of 50,000 option shares granted on 8/12/2004 at an exercise price of $21.19 and 150,000 option shares granted on 1/3/2005 at an exercise price of $24.18. |
(5) | Consists of 100,000 option shares granted on 1/16/2004 at an exercise price of $34.585. Mr. Gray resigned from the Company on 10/4/04 and these option shares were cancelled at that time. |
(i) Each outstanding option or stock appreciation right under the discretionary grant program will automatically accelerate in full upon a change in control, if that option or stock appreciation right is not assumed or otherwise continued in effect by the successor corporation or replaced with a cash incentive program which preserves the spread existing on the unvested shares subject to the option or stock appreciation right (the excess of the fair market value of those shares over the exercise or base price payable for such shares) and provides for subsequent payout of that spread in accordance with the same vesting schedule in effect for those shares. | |
(ii) All unvested shares outstanding under the discretionary grant and stock issuance programs will immediately vest upon a change in control, except to the extent our repurchase rights with respect to those shares are to be assigned to the successor corporation or otherwise continued in effect. Each outstanding restricted stock unit or other stock-based award under the stock issuance program will vest as to the number of shares of our Common Stock subject to such unit or award upon the occurrence of a change in control, unless the unit or award is assumed by the successor corporation or otherwise continued in effect. | |
(iii) The plan administrator will have complete discretion to grant one or more options or stock appreciation rights under the discretionary grant program which will become exercisable for all the shares in the event the individual’s service with us or the successor entity is terminated (actually or constructively) within a designated period following a change in control transaction in which those options or stock appreciation rights are assumed or otherwise continued in effect. The vesting of outstanding shares and the vesting and issuance of the shares of Common Stock subject to outstanding restricted stock units or other stock-based awards under the stock issuance program may also be structured to accelerate upon similar terms and conditions. | |
(iv) The plan administrator will have the discretion to structure one or more option grants or stock appreciation rights under the discretionary grant program so that those options or stock appreciation rights will immediately vest upon a change in control, whether or not the options or stock appreciation rights are to be assumed or otherwise continued in effect. The plan administrator may also structure unvested stock issuances or restricted stock units or other share rights awards under the stock issuance program so that those issuances or awards will in all events vest immediately upon a change in control. |
17
Table of Contents
(v) A change in control will be deemed to occur in the event (a) we are acquired by merger or asset sale, (b) there occurs a stockholder-approved sale, transfer or other disposition (including in whole or in part through one or more licensing arrangements) of all or substantially all of our assets, or (c) there occurs any transaction or series of related transactions pursuant to which any person or group of related persons becomes directly or indirectly the beneficial owner of securities possessing (or convertible into or exercisable for securities possessing) more than fifty percent (50%) of the total combined voting power of our securities outstanding immediately after the consummation of such transaction or series of related transactions, whether such transaction involves a direct issuance from us or the acquisition of outstanding securities held by one or more of our stockholders. | |
(vi) The plan administrator will also have the discretionary authority to structure one or more outstanding options or stock appreciation rights under the discretionary grant program so that those options or stock appreciation rights will, immediately prior to the effective date of a hostile take-over, become exercisable as to all the shares of Common Stock at the time subject to those options or stock appreciation rights. In addition, the plan administrator will have the authority to structure one or more awards under the stock issuance program so that the shares of Common Stock subject to those awards will immediately vest upon the consummation of a hostile take-over. Alternatively, the plan administrator may condition such vesting acceleration upon the subsequent termination of the individual’s service within a designated period following the effective date of such hostile take-over. | |
(vii) A hostile take-over will be deemed to occur if (a) there is a change in the majority of our board of directors as a result of one or more contested elections for board membership or (b) securities possessing more than fifty percent (50%) of the total combined voting power of our outstanding securities are acquired pursuant to a hostile tender offer. |
18
Table of Contents
Incentive Options. No taxable income is recognized by the optionee at the time of the option grant, and no taxable income is recognized for regular tax purposes at the time the option is exercised, although taxable income may arise at that time for alternative minimum tax purposes. The optionee will recognize taxable income in the year in which the purchased shares are sold or otherwise made the subject of certain other dispositions. For Federal tax purposes, dispositions are divided into two categories: |
19
Table of Contents
(i) qualifying, and (ii) disqualifying. A qualifying disposition occurs if the sale or other disposition is made more than two (2) years after the date the option for the shares involved in such sale or disposition is granted and more than one (1) year after the date the option is exercised for those shares. If the sale or disposition occurs before these two periods are satisfied, then a disqualifying disposition will result. | |
Upon a qualifying disposition, the optionee will recognize long-term capital gain in an amount equal to the excess of (i) the amount realized upon the sale or other disposition of the purchased shares over (ii) the exercise price paid for the shares. If there is a disqualifying disposition of the shares, then the excess of (i) the fair market value of those shares on the exercise date or (if less) the amount realized upon such sale or disposition over (ii) the exercise price paid for the shares will be taxable as ordinary income to the optionee. Any additional gain recognized upon the disposition will be a capital gain. | |
If the optionee makes a disqualifying disposition of the purchased shares, then we will be entitled to an income tax deduction, for the taxable year in which such disposition occurs, equal to the amount of ordinary income recognized by the optionee as a result of the disposition. We will not be entitled to any income tax deduction if the optionee makes a qualifying disposition of the shares. | |
Non-Statutory Options. No taxable income is recognized by an optionee upon the grant of a non-statutory option. The optionee will in general recognize ordinary income, in the year in which the option is exercised, equal to the excess of the fair market value of the purchased shares on the exercise date over the exercise price paid for the shares, and we will be required to collect the withholding taxes applicable to such income from the optionee. | |
If the shares acquired upon exercise of the non-statutory option are unvested and subject to repurchase by us in the event of the optionee’s termination of service prior to vesting in those shares, then the optionee will not recognize any taxable income at the time of exercise but will have to report as ordinary income, as and when our repurchase right lapses, an amount equal to the excess of (i) the fair market value of the shares on the date the repurchase right lapses over (ii) the exercise price paid for the shares. The optionee may, however, elect under Section 83(b) of the Internal Revenue Code to include as ordinary income in the year of exercise of the option an amount equal to the excess of (i) the fair market value of the purchased shares on the exercise date over (ii) the exercise price paid for such shares. If the Section 83(b) election is made, the optionee will not recognize any additional income as and when the repurchase right lapses. | |
We will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the optionee with respect to the exercised non-statutory option. The deduction will in general be allowed for our taxable year in which such ordinary income is recognized by the optionee. |
20
Table of Contents
21
Table of Contents
22
Table of Contents
23
Table of Contents
24
Table of Contents
• | Purchase rights granted to a participant may not permit such individual to purchase more than $25,000 worth of our Common Stock (valued at the time each purchase right is granted) for each calendar year those purchase rights are outstanding at any time. | |
• | Purchase rights may not be granted to any individual if such individual would, immediately after the grant, own or hold outstanding options or other rights to purchase, stock possessing five percent (5%) or more of the total combined voting power or value of all classes of our outstanding stock or the outstanding stock of any of our affiliates. | |
• | No participant may purchase more than 1,500 shares of Common Stock on any one purchase date. |
25
Table of Contents
Weighted Average | ||||||||||
Number of | Purchase Price | |||||||||
Name and Position | Purchased Shares | per Share($) | ||||||||
Eli Harari | President and CEO | 1,930 | 21.62 | |||||||
Sanjay Mehrotra | Executive VP & COO | — | — | |||||||
Judy Bruner | Executive VP, Administration & CFO | — | — | |||||||
Nelson Chan | EVP & GM, Consumer & Handset Business | 1,726 | 21.40 | |||||||
Michael Gray | Sr. VP, Finance & Administration & CFO | 982 | 21.37 | |||||||
All current executive officers as a group (4 persons) | 3,656 | 21.51 | ||||||||
All employees, including current officers who are not executive officers, as a group (approximately 600 persons) | 385,203 | 21.23 |
26
Table of Contents
27
Table of Contents
2004 | 2003 | |||||||
(a) Audit Fees | $ | 1,355,000 | $ | 482,000 | ||||
(b) Audit Related Fees | 221,000 | 171,000 | ||||||
(c) Tax Fees | 416,000 | 522,000 | ||||||
(d) All Other Fees | 30,000 | — |
(a) | Audit fees consist of professional services provided in connection with the audit of the Company’s financial statements and review of the Company’s quarterly financial statements. These audit fees also include professional services provided in connection with the annual audit of the Company’s internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002, the audit of the Company’s employee benefit plan and other statutory audits of subsidiaries or affiliates of the Company. |
(b) | Audit related fees consist primarily of accounting consultations, services provided in connection with regulatory filings, technical accounting guidance and other attestation services. |
(c) | For fiscal years 2004 and 2003, tax fees principally included tax compliance fees, including expatriate compliance services. Total compliance fees were $360,000 and $372,000 for 2004 and 2003, respectively. Tax fees also include tax advice and tax planning fees of $56,000 and $150,000 for fiscal 2004 and 2003, respectively. |
(d) | All other fees includes services provided in connection with the Company’s expatriate relocation programs. |
28
Table of Contents
29
Table of Contents
Amount and Nature of Beneficial Ownership | ||||||||
Name or Group of Beneficial Owners | Number of Shares | Percentage Owned (%) | ||||||
Entities Controlled by Citigroup, Inc.(1) | 14,621,074 | 8.1 | ||||||
Entities Controlled by Marsh & McLennon Companies, Inc. and Putnam, LLC(2) | 11,674,635 | 6.5 | ||||||
Judy Bruner(3) | 128,400 | * | ||||||
Nelson Chan(4) | 720,099 | * | ||||||
Irwin Federman 5) | 186,744 | * | ||||||
Michael Gray(6) | 1,860 | * | ||||||
Dr. Eli Harari(7) | 5,788,408 | 3.2 | ||||||
Catherine P. Lego 8) | 424,548 | * | ||||||
Michael E. Marks(9) | 242,000 | * | ||||||
Sanjay Mehrotra(10) | 961,997 | * | ||||||
Dr. James D. Meindl(11) | 189,864 | * | ||||||
Alan F. Shugart(12) | 96,000 | * | ||||||
All directors and current executive officers as a group (9 persons)(13) | 8,738,344 | 4.8 |
* | Less than 1% of the outstanding Common Stock. |
(1) | The principal address of Citigroup, Inc. is 399 Park Avenue, New York, New York 10043 and the principal address of Citigroup Global Markets Inc. (“CGM”), Citigroup Financial Products Inc. (“CFP”), and Citigroup Global Markets Holdings Inc. (“CGMH”) is 388 Greenwich Street, New York, New York 10013. Pursuant to a joint Schedule 13G/ A dated February 4, 2005 filed with the SEC by and on behalf of CGM, CFP, CGMH and Citigroup, Inc., CGM reported that it had shared voting and dispositive power over 10,556,237 shares of Common Stock, CFP reported that it had shared voting and dispositive power over 10,664,932 shares of Common Stock, CGMH reported that it had shared voting and dispositive power over 14,245,222 shares of Common Stock, and Citigroup, Inc. reported that it had shared voting and dispositive power over 14,621,074 shares of Common Stock. |
30
Table of Contents
(2) | The principal address of Marsh & McLennon Companies, Inc (“MMC”) is 1166 Avenue of the Americas, New York, NY 10036 and the principal address of Putnam, LLC d/b/a Putnam Investments (“PI”), Putnam Investment Management, LLC (“PIM”) and The Putnam Advisory Company (“PAC”) is One Post Office Square, Boston, Massachusetts 02109. Pursuant to a joint Schedule 13G dated February 10, 2005 filed with the SEC by and on behalf of MMC, PI, PIM and PAC, MMC reported that it had shared voting and dispositive power over no shares of Common Stock, PI reported that it had shared voting power over 3,168,877 shares of Common Stock and shared dispositive power over 11,674,635 shares of Common Stock, PIM reported that it had shared voting power over 857,480 shares of Common Stock and shared dispositive power over 8,610,979 shares of Common Stock, and PAC reported that it had shared voting power over 2,311,397 shares of Common Stock and shared dispositive power over 3,063,656 shares of Common Stock. | |
(3) | Comprised of 400 shares held as community property in the name of Ms. Bruner and her husband and 128,000 shares subject to immediately exercisable options granted to Ms. Bruner, but some of the shares subject to those options are currently unvested and would, if purchased, be subject to a repurchase right of the Company that lapses over time. | |
(4) | Includes 712,508 shares subject to outstanding options owned by Mr. Chan, which were exercisable on March 15, 2005 or within 60 days after that date. Also includes 10 shares owned by Mr. Chan’s spouse and 2,575 shares subject to outstanding options granted to Mr. Chan’s spouse, which were exercisable on March 15, 2005 or within 60 days after that date. Mr. Chan disclaims beneficial ownership of the securities held by his spouse. | |
(5) | Includes 96,000 shares subject to immediately exercisable options granted to Mr. Federman, but some of the shares subject to those options are currently unvested and would, if purchased, be subject to a repurchase right of the Company that lapses over time. | |
(6) | Includes 1,860 shares held in the name of a trust for the benefit of Mr. Gray and his spouse. | |
(7) | Includes 3,105,906 shares held in the name of a trust for the benefit of Dr. Harari and his spouse. Also includes 2,418,216 shares subject to outstanding options granted to Dr. Harari, which were exercisable on March 15, 2005, or within 60 days after that date. Also includes 45,332 shares owned directly by his son and 201,972 shares held in the name of a trust for the benefit of his children. | |
(8) | Includes 293,580 shares held in the name of a trust of which Ms. Lego is co-trustee. Also includes 128,000 shares subject to immediately exercisable options granted to Ms. Lego, but some of the shares subject to those options are currently unvested and would, if purchased, be subject to a repurchase right of the Company that lapses over time. | |
(9) | Includes 5,000 shares held in the name of a trust for the benefit of Mr. Marks and his spouse, 65,000 shares held by a limited liability company controlled by Mr. Marks, 6,000 shares held in the name of a trust for the benefit of his son and 6,000 shares held in the name of a trust for the benefit of his daughter. Also includes 160,000 shares subject to immediately exercisable options granted to Mr. Marks, but some of the shares subject to those options would, if exercised, be subject to a repurchase right of the Company that lapses over time. |
(10) | Includes 92,814 shares held in the name of a trust for the benefit of Mr. Mehrotra and his spouse. Also includes 869,183 shares subject to outstanding options granted to Mr. Mehrotra, which were exercisable on March 15, 2005 or within 60 days after that date. |
(11) | Comprised of 61,864 shares held as community property in the name of Dr. Meindl and his spouse and 128,000 shares subject to immediately exercisable options granted to Dr. Meindl, but some of the shares subject to those options are currently unvested and would, if purchased, be subject to a repurchase right of the Company that lapses over time. |
(12) | Comprised of 96,000 shares subject to immediately exercisable options granted to Mr. Shugart, but some of the shares subject to those options are currently unvested and would, if purchased, be subject to a repurchase right of the Company that lapses over time. |
(13) | Includes shares subject to options exercisable within 60 days after March 15, 2005, including those identified in notes (3), (4), (5), (7), (8), (9), (10) (11) and (12). |
31
Table of Contents
(A) | (B) | (C) | ||||||||||
Weighted | Number of Securities Remaining | |||||||||||
Number of Securities | Average | Available for Future Issuance | ||||||||||
to be Issued Upon | Exercise Price of | Under Equity Compensation | ||||||||||
Exercise of | Outstanding | Plans (Excluding Securities | ||||||||||
Plan Category | Outstanding Options | Options | Reflected in Column A) | |||||||||
Equity Compensation Plans Approved by Stockholders(1) | 25,979,962 | (3) | $ | 18.575 | 17,787,604 | (4) | ||||||
Equity Compensation Plans Not Approved by Stockholders(2) | 0 | N/A | 4,000,000 | |||||||||
Total | 25,979,962 | (5) | $ | 18.575 | 21,787,604 | (6) | ||||||
(1) | Consists solely of the 1995 Plan, the 1995 Employee Stock Purchase Plan, the 1995 International Employee Stock Purchase Plan (together with the 1995 Employee Stock Purchase Plan, the “Purchase Plans”), and the Directors Plan. |
(2) | Consists solely of the Special Stock Option Plan. No options under this plan have been issued. |
(3) | Excludes purchase rights accruing under the Company’s Purchase Plans, which have a combined stockholder-approved reserve of 7,382,954 shares. Under the Purchase Plans, each eligible employee may purchase up to 3,000 shares of Common Stock at the end of each six-month offering period (the last U.S. business day in January and July each year) at a purchase price per share equal to 85% of the lower of (i) the closing selling price per share of Common Stock on the employee’s entry date into that six-month offering period or (ii) the closing selling price per share on the purchase date. |
(4) | Consists of shares available for future issuance under the 1995 Plan, the Directors Plan, and the Purchase Plans. As of March 15, 2005, 16,571,392 shares of Common Stock were available for issuance under the 1995 Plan, 1,216,212 shares of Common Stock were available for issuance under the Directors Plan, and |
32
Table of Contents
3,539,839 shares of Common Stock were available for issuance under the combined share reserve for the Purchase Plans. The number of shares of Common Stock available for issuance under the 1995 Plan, the Directors Plan and under the combined share reserve for the Purchase Plans automatically increases on the first trading day of each calendar year by an amount equal to 4.36%, 0.2% and 0.43%, respectively, of the total number of shares of Common Stock outstanding on the last trading day of December in the immediately preceding calendar year; however, in no event will any such annual increase to the 1995 Plan, the Directors Plan or the combined share reserve under the Purchase Plans exceed 8,000,000 shares, 400,000 shares, and 800,000 shares of Common Stock, respectively. | |
(5) | Weighted average estimated remaining life of the outstanding options is 7.49 years. |
(6) | If our stockholders approve the 2005 Plan at the Annual Meeting, the portion of the share reserve under each plan in excess of the then-outstanding options will be cancelled. |
Special Stock Option Plan |
33
Table of Contents
Long-Term | |||||||||||||||||||||
Compensation | All Other | ||||||||||||||||||||
Annual Compensation | Awards | Compensation | |||||||||||||||||||
Underlying | Securities | ||||||||||||||||||||
Name & Principal Position | Years | Salary ($)(1) | Bonus ($)(2) | Options (#) | ($) | ||||||||||||||||
Dr. Eli Harari | 2004 | 618,982 | 1,440,000 | 600,000 | 6,150 | (3) | |||||||||||||||
President, Chief Executive | 2003 | 538,491 | 1,000,000 | 400,000 | 6,000 | (3) | |||||||||||||||
Officer, Director | 2002 | 425,230 | 485,100 | 0 | 5,100 | (3) | |||||||||||||||
Sanjay Mehrotra | 2004 | 358,083 | 625,000 | 375,000 | 6,145 | (3) | |||||||||||||||
Executive Vice President & | 2003 | 318,148 | 500,000 | 250,000 | 6,000 | (3) | |||||||||||||||
Chief Operating Officer | 2002 | 262,282 | 185,356 | 30,000 | 4,761 | (3) | |||||||||||||||
Judy Bruner(4) | 2004 | 176,208 | 325,000 | 450,000 | (5) | 0 | |||||||||||||||
Executive Vice President, | |||||||||||||||||||||
Administration & CFO | |||||||||||||||||||||
Nelson Chan | 2004 | 320,491 | 500,000 | 300,000 | (6) | 6,150 | (3) | ||||||||||||||
Executive Vice President & | 2003 | 276,404 | 400,000 | 150,000 | (6) | 6,000 | (3) | ||||||||||||||
General Manager, Consumer | 2002 | 238,213 | 128,458 | 70,000 | 5,100 | (3) | |||||||||||||||
And Handset Business | |||||||||||||||||||||
Michael Gray(7) | 2004 | 234,699 | 0 | 100,000 | 67,487 | (8) | |||||||||||||||
CFO, Senior Vice President, | 2003 | 251,724 | 161,544 | 100,000 | 6,000 | (3) | |||||||||||||||
Finance & Administration | 2002 | 202,105 | 88,888 | 78,000 | 4,944 | (3) |
(1) | Includes salary deferral contributions to the Company’s 401(k) Plan. |
(2) | Bonus earned for the year indicated but paid in the following year. |
(3) | Company paid 401(k) match. |
(4) | Ms. Bruner assumed the role of CFO on June 21, 2004. |
(5) | Excludes 32,000 option shares granted on May 20, 2004 in connection with Ms. Bruner’s service as a member of the Board of Directors. This grant was subsequently cancelled when Ms. Bruner resigned from the Board in July, 2004. |
(6) | Does not include an option for 2,800 shares granted to Mr. Chan’s spouse in 2004, an employee of the Company. Mr. Chan disclaims any beneficial ownership of the options held by his spouse. |
(7) | Mr. Gray resigned as CFO on June 21, 2004. |
(8) | Includes $5,125 of Company paid 401K match and severance payments in the amount of $62,362 pursuant to the Settlement and Release Agreement by and between the Company and Michael Gray filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 26, 2004. |
34
Table of Contents
% of Total | Potential Realizable Value at | |||||||||||||||||||||||
Number of | Options | Assumed Annual Rates of | ||||||||||||||||||||||
Securities | Granted to | Stock Price Appreciation for | ||||||||||||||||||||||
Underlying | Employees | Exercise | Option Term(5) | |||||||||||||||||||||
Options | in Fiscal | Price | Expiration | |||||||||||||||||||||
Name | Granted(1)(2) | Year(3) | ($/Sh)(4) | Date | 5% ($) | 10% ($) | ||||||||||||||||||
Dr. Eli Harari | 600,000 | 9.39 | 34.585 | 1/15/14 | 13,045,674 | 33,057,697 | ||||||||||||||||||
Sanjay Mehrotra | 300,000 | 4.69 | 34.585 | 1/15/14 | 6,522,837 | 16,528,849 | ||||||||||||||||||
75,000 | 1.17 | 21.190 | 8/11/14 | 999,125 | 2,531,779 | |||||||||||||||||||
Judy Bruner | 450,000 | (6) | 7.04 | 20.120 | 6/20/14 | 5,692,041 | 14,423,613 | |||||||||||||||||
Nelson Chan(7) | 250,000 | 3.91 | 34.585 | 1/15/14 | 5,435,698 | 13,774,041 | ||||||||||||||||||
50,000 | .78 | 21.190 | 8/11/14 | 666,083 | 1,687,853 | |||||||||||||||||||
Michael Gray(8) | 100,000 | 1.56 | 34.585 | 10/04/04 | — | — |
(1) | The grant dates for the listed options were January 16, 2004, June 21, 2004 and August 12, 2004. Each of the listed options will become exercisable for 25% of the option shares upon the optionee’s continuation in service through the one year anniversary of the grant date and will become exercisable for the remaining shares in a series of twelve (12) successive quarterly installments upon the optionee’s completion of each additional three (3)-month period of service with the Company over the 36-month period measured from the one year anniversary date. |
(2) | Each option will become immediately exercisable for all the option shares upon an acquisition of the Company by merger or asset sale, unless the option is assumed or replaced by the acquiring entity. Each option has a maximum term of ten (10) years, subject to earlier termination in the event of the optionee’s cessation of service with the Company. Each option includes a limited stock appreciation right that will allow the optionee, upon the acquisition of 50% or more of the Company’s outstanding voting stock pursuant to a hostile tender offer, to surrender that option to the Company, to the extent the option is at the time exercisable for vested shares, in exchange for a cash distribution based on the tender offer price. |
(3) | The Company granted options to purchase 6,392,815 shares of Common Stock to all employees during fiscal 2004. |
(4) | The exercise price may be paid in cash, in shares of the Company’s Common Stock valued at fair market value on the exercise date, or the extent permissible under applicable law and Company policy, through a cashless exercise procedure involving a same day sale of the purchased shares. |
(5) | Potential gains are net of exercise price, but before taxes associated with exercise. There is no assurance that the actual stock price appreciation over the 10-year option term will be at the assumed 5% and 10% levels of assumed annual rates of compounded stock price appreciation or at any other defined level. Unless the market price of the Common Stock appreciates over the option term, no value will be realized from the option grants made to the executive officers. |
(6) | Excludes 32,000 option shares granted on May 20, 2004 in connection with Ms. Bruner’s service as a member of the Board of Directors. This grant was subsequently cancelled when Ms. Bruner resigned from the Board in July, 2004. |
(7) | Does not include options for 2,800 shares granted to Mr. Chan’s spouse, an employee of the Company. Mr. Chan disclaims beneficial ownership of the options held by his spouse. |
(8) | Mr. Gray resigned from the Company on 10/4/04 and the option was cancelled at that time. |
35
Table of Contents
Number of Securities | Value of Unexercised in-the- | |||||||||||||||||||||||
Shares | Underlying Unexercised | Money Options at FY-End | ||||||||||||||||||||||
Acquired on | Aggregate | Options at FY-End (#) | ($)(1) | |||||||||||||||||||||
Exercise | Value Realized | |||||||||||||||||||||||
Name | (#) | ($)(2) | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||
Dr. Eli Harari | 357,252 | 7,855,264 | 2,258,216 | 1,212,500 | 35,354,036 | 10,582,063 | ||||||||||||||||||
Sanjay Mehrotra | 20,000 | 429,600 | 730,434 | 609,376 | 12,255,154 | 4,363,375 | ||||||||||||||||||
Judy Bruner | 0 | 0 | 128,000 | 450,000 | 2,016,480 | 2,182,500 | ||||||||||||||||||
Nelson Chan(3) | 0 | 0 | 618,802 | 453,126 | 8,947,539 | 2,798,894 | ||||||||||||||||||
(4) | 1,278 | 25,347 | 1,200 | 4,550 | 17,128 | 29,721 | ||||||||||||||||||
Michael Gray | 225,937 | 2,569,696 | — | — | — | — |
(1) | Based on the fair market value of the Company’s Common Stock at December 31, 2004, the last trading day of the Company’s fiscal year which ended January 2, 2005, $24.97 per share (the closing selling price of the Company’s Common Stock on that date on the Nasdaq National Market), less the exercise price payable for such shares. |
(2) | Equal to the fair market value of the shares at the time of acquisition over the option exercise price paid for those shares. |
(3) | Options exercised, and outstanding options held, by Mr. Chan. |
(4) | Option exercises, and outstanding options held, by Mr. Chan’s spouse. Mr. Chan disclaims beneficial ownership of those options. |
36
Table of Contents
Submitted by the Audit Committee | |
of the Board of Directors | |
Irwin Federman | |
Catherine P. Lego | |
Alan F. Shugart |
37
Table of Contents
38
Table of Contents
39
Table of Contents
Submitted by the Compensation Committee | |
of the Board of Directors | |
Michael E. Marks | |
Dr. James D. Meindl | |
Alan F. Shugart |
40
Table of Contents
Submitted by the Independent Directors | |
of the Board of Directors | |
Irwin Federman | |
Catherine P. Lego | |
Michael E. Marks | |
Dr. James D. Meindl | |
Alan F. Shugart |
41
Table of Contents
• | a cash payment equal to the sum of (A) one times the officer’s annual base compensation at the time of the Change of Control or the time of termination, whichever annual base salary amount is greater, plus (B) the officer’s annual target bonus in effect for the year of the termination; | |
• | accelerated vesting of any Company stock options that are outstanding and otherwise unvested at the time of the termination and up to one year after the termination to exercise any vested Company stock options; | |
• | continued medical, disability, life and other insurance coverage for a period of 24 months after the termination; and | |
• | executive-level outplacement services, an office and administrative support for a period of 12 months after the termination. |
42
Table of Contents
43
Table of Contents
![PERFORMANCE GRAPH TO COME](https://capedge.com/proxy/DEF 14A/0000950134-05-007069/f07222def0722201.gif)
44
Table of Contents
BY ORDER OF THE BOARD OF DIRECTORS | |
![]() | |
Eli Harari | |
President and Chief Executive Officer |
45
Table of Contents
THIS PROXY IS SOLICITED ON BEHALF OF SANDISK CORPORATION’S BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 27, 2005.
Eli Harari and Charles Van Orden, or either of them, are hereby appointed as the lawful agents and proxies of the undersigned (with all powers the undersigned would possess if personally present, including full power of substitution) to represent and to vote all shares of Common Stock of SanDisk Corporation (the “Company”) which the undersigned is entitled to vote at the Company’s Annual Meeting of Stockholders to be held on May 27, 2005 at 8:00 a.m., local time, and at any adjournments or postponements thereof, as follows:
The Board of Directors recommends a vote FOR the election of Directors and FOR proposals 2, 3 and 4. This proxy will be voted as directed, or, if no direction is indicated, will be voted FOR each of the proposals and, at the discretion of the persons named as proxies, upon such other matters as may properly come before the meeting or any postponement or adjournment thereof. This proxy may be revoked at any time before it is voted.
(Continued and to be voted on reverse side.)
Telephone and Internet Voting Instructions
• | Call toll free 1-800-745-6740 in the United States or Canada any time on a touch tone telephone. There isNO CHARGEto you for the call. | |||
• | Follow the simple instructions provided by the recorded message. |
• | Go to the following web site: | |||
WWW.COMPUTERSHARE.COM/US/PROXY | ||||
• | Enter the information requested on your computer screen and follow the simple instructions. |
C0123456789
12345
If you vote by telephone or the Internet, please DO NOT mail back this proxy card.
Proxies submitted by telephone or the Internet must be received by 5:30 p.m., Central Daylight Time on May 26, 2005.
THANK YOU FOR VOTING
Table of Contents
SanDisk Corporation
![]() | MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 ![]() |
MMMMMMMMMMMM
000000000.000 ext
000000000.000 ext
000000000.000 ext
000000000.000 ext
000000000.000 ext
000000000.000 ext
000000000.000 ext
C 1234567890 J N T
o | Mark this box with an X if you have made changes to your name or address details above. |
1. | The Board of Directors recommends a vote “FOR” the election of the Nominees listed below. |
For | Withhold | For | Withhold | |||||||||
01 - Dr. Eli Harari | o | o | 04 - Michael E. Marks | o | o | |||||||
02 - Irwin Federman | o | o | 05 - Dr. James D. Meindl | o | o | |||||||
03 - Catherine P. Lego | o | o | 06 - Alan F. Shugart | o | o |
B Issues
For | Against | Abstain | ||||||
2. | To approve the implementation of the SanDisk Corporation 2005 Stock Incentive Plan. | o | o | o | ||||
3. | To approve the implementation of the SanDisk Corporation 2005 Employee Stock Purchase Plan and the SanDisk Corporation 2005 International Employee Stock Purchase Plan, which will share a common share reserve of the Company’s common stock. | o | o | o |
For | Against | Abstain | ||||||
4. | To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending January 1, 2006. | o | o | o |
n | 1 U P X H H H P P P P 0052011 | ![]() |