Exhibit 10.2
SANDISK CORPORATION
CHANGE OF CONTROL BENEFITS AGREEMENT
This Change of Control Executive Benefits Agreement ("Agreement") is made
and entered into effective as of __________, 2004 (the "Effective Date") by and
between SanDisk Corporation, a Delaware corporation (the "Company"), and Eli
Harari (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is employed by the Company in a key position and
has made and is expected to continue to make major contributions to the
profitability, growth and financial strength of the Company.
WHEREAS, the Company considers the continued availability of the
Executive's services, managerial skills and business experience to be in the
best interest of the Company and its stockholders, and desires to assure the
continued services of the Executive on behalf of the Company without (a) the
distraction of the Executive occasioned by the possibility of a change of
control of the Company and (b) the possibility that the Executive would seek
other employment following the announcement of a change of control of the
Company and if such announced transaction were not consummated, the Company
would be seriously harmed.
WHEREAS, the Company's Board of Directors approved the terms of this
Agreement at its meeting on May 20, 2004.
NOW, THEREFORE, in consideration of these premises, the parties agree that
the following shall constitute the agreement between the Company and the
Executive:
1. DEFINITIONS. Whenever the following terms are used in this
Agreement, they shall have the meaning specified below unless the context
clearly indicates to the contrary:
1.01 "Administrator" shall mean the Board or its
delegate.
1.02 "Board" shall mean the Board of Directors of the
Company.
1.03 "Cause" shall mean (i) fraud or other willful
misconduct with respect to the Company's business, (ii) gross negligence in the
performance of duties, or (iii) conviction or plea of nolo contendere to a
felony.
1.04 "Change of Control" means the occurrence of any of
the following events:
(a) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing fifty percent (50%)
or more of the then outstanding shares of common stock of the Company or
the total voting power represented by the Company's then outstanding
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voting securities (other than pursuant to a Business Combination which is
covered by clause (c) below);
(b) The consummation of the sale or other disposition
(including in whole or in part through licensing arrangement(s)) of all or
substantially all of the Company's assets, other than sales, other
dispositions or licenses of assets made to a parent or a wholly-owned
subsidiary of the Company, or an entity under common control with the
Company;
(c) The consummation of a reorganization, merger, statutory
share exchange or consolidation or similar transaction involving the
Company or the acquisition of assets or stock of another entity by the
Company or any of its subsidiaries, or a series of related such
transactions (each, a "Business Combination"), in each case unless
following such Business Combination (i) the voting securities of the
Company outstanding immediately prior thereto continue to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity or any entity (a "Parent") that, as a
result of such transaction, owns the Company or the surviving entity or
all or substantially all of the Company's or surviving entity's assets
directly or through one or more subsidiaries) at least fifty percent (50%)
of the total voting power represented by the voting securities of the
Company or such surviving entity or Parent outstanding immediately after
such Business Combination; (ii) no person (excluding any entity resulting
from such Business Combination or a Parent or any employee benefit plan
(or related trust) of the Company or such entity resulting from such
Business Combination or Parent) beneficially owns, directly or indirectly,
50% or more of, respectively, the then-outstanding shares of common stock
of the entity resulting from such Business Combination or the total voting
power of the then-outstanding voting securities of such entity, except to
the extent that the ownership in excess of 50% existed prior to the
Business Combination; and (iii) at least a majority of the members of the
board of directors of the entity resulting from such Business Combination
or the Parent thereof were members of the Incumbent Board (as defined
below) at the time of the execution of the initial agreement or of the
action of the Board providing for such Business Combination;
(d) Individuals who, as of the Effective Date, constitute
the Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the Effective Date whose appointment,
election, or nomination for election by the Company's stockholders, was
approved by a vote of at least two-thirds of the directors then comprising
the Incumbent Board (including for these purposes, the new members whose
appointment, election or nomination was so approved, without counting the
member and his or her predecessor twice) shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
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(e) Approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company other than in the
context of a transaction or series of related transactions that would not
constitute a Change of Control under clause (c) above.
1.05 A "Change of Control Termination" shall mean a
termination of employment within twelve (12) months following a Change of
Control where (a) the Company or a party effecting a Change of Control of
the Company terminates the Executive's employment without Cause, other
than as the result of the Executive's death or Permanent Disability, or
(b) the Executive resigns with Good Reason.
1.06 "Code" shall mean the Internal Revenue Code of
1986, as amended.
1.07 "Date of Termination" following a Change of
Control shall mean the dates, as the case may be, for the following events: (a)
if the Executive's employment is terminated by death, the date of death; (b) if
the Executive's employment is terminated due to a Permanent Disability, thirty
(30) days after the Notice of Termination is given (provided that the Executive
shall not have returned to the performance of his or her duties on a full-time
basis during such period); (c) if the Executive's employment is terminated
pursuant to a termination for Cause, the date specified in the Notice of
Termination; (d) if the Executive's employment is terminated by a Change of
Control Termination, the date specified in the Notice of Termination; and (e) if
the Executive's employment is terminated for any other reason, fifteen (15) days
after delivery of the Notice of Termination unless otherwise agreed by the
Executive and the Company.
1.08 "Disability" shall mean that the Executive is
unable, by reason of injury, illness or other physical or mental impairment, to
perform the essential functions of the position for which the Executive is
employed, even with a reasonable accommodation, which inability is certified by
a licensed physician reasonably selected by the Company.
1.09 "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
1.10 "Good Reason" shall mean the occurrence of any of
the following, without the Executive's express written consent, within twelve
(12) months following a Change of Control:
(a) The assignment to the Executive of any positions,
duties, responsibilities or status adversely inconsistent or diminutive,
in comparison with, or having less authority than, the Executive's
positions, duties, responsibilities or status with the Company immediately
prior to a Change of Control (including, without limitation, retaining
such position, duties, responsibilities or status when the Company is not
a publicly traded company or not the ultimate parent entity of the group
or when the Company has consummated a transaction constituting a "Change
of Control" under Section 1.04(b) above);
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(b) An alteration in the nature of the Executive's reporting
responsibilities, titles, or offices with the Company from those in effect
immediately prior to a Change of Control (including, without limitation,
retaining such reporting responsibilities, titles or offices with the
Company when the Company is not a publicly traded company or not the
ultimate parent entity of the group or when the Company has consummated a
transaction constituting a "Change of Control" under Section 1.04(b)
above);
(c) Any removal of the Executive from, or any failure to
reelect the Executive to, any such positions, except in connection with a
termination of the employment of the Executive for Cause, Permanent
Disability, or as a result of the Executive's death;
(d) A reduction by the Company in the Executive's base
salary or annual target bonus in effect immediately prior to a Change of
Control;
(e) Any breach by the Company of any provision of this
Agreement;
(f) The requirement by the Company that the Executive's
principal place of employment be relocated more than thirty (30) miles
from his or her principal place of employment immediately prior to a
Change of Control; or
(g) The Company's failure to obtain a satisfactory agreement
from any successor to assume and agree to perform the Company's
obligations under this Agreement, as contemplated in Section 9.02(b)
hereof.
1.11 "Notice of Termination" shall mean a written
notice which shall indicate the termination provision(s) relied upon.
1.12 "Permanent Disability" shall mean if, as a result
of the Executive's Disability, the Executive shall have been absent from his or
her duties with the Company on a full-time basis for a total of six (6) months
of any consecutive eight (8) month period.
1.13 "Termination of Employment" shall mean the
termination of the employee-employer relationship between the Executive and the
Company for any reason, voluntarily or involuntarily, with or without Cause,
including, without limitation, a termination by reason of resignation (whether
for Good Reason or otherwise), discharge (with or without Cause), Permanent
Disability, death or retirement, but excluding termination where there is a
simultaneous re-employment of the Executive by the Company.
1.14 "Willful" shall mean not in good faith and without
reasonable belief that an act or omission was in the best interest of the
Company.
2. TERM. This Agreement shall be effective until either mutually
terminated by the parties or upon a termination of Executive's employment that
does not constitute a Change of Control Termination, subject to a maximum term
of ten (10) years from the Effective Date.
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3. COMPENSATION UPON A CHANGE OF CONTROL.
3.01 STOCK OPTIONS. On the date a Change of Control
occurs, for purposes of Executive's vesting in any and all stock options granted
to the Executive by the Company that are outstanding upon and have not vested as
of the date of the Change of Control, Executive shall be deemed to have
completed one additional year of vesting service. Any additional stock options
that vest as a result of such additional year of vesting service will be deemed
to be vested as of the Change of Control. Any remaining unvested options shall
continue in accordance with their normal terms but subject to Executive's
additional year of deemed vesting service. (For example, if a Change of Control
occurred on October 1, 2004 and Executive held a stock option on that date that
was otherwise scheduled to vest in three equal installments on January 1, 2005,
January 1, 2006 and January 1, 2007, the January 1, 2005 installment would vest
as of the date of the Change of Control as a result of the deemed extra year of
vesting service and the remaining two installments would, after giving effect to
the additional year of vesting service, be deemed to vest on January 1, 2005 and
January 1, 2006.)
4. TERMINATION OF EMPLOYMENT OF EXECUTIVE.
4.01 GOOD REASON. Notwithstanding anything contained in
any employment agreement between the Executive and the Company to the contrary,
during the term of this Agreement the Executive may terminate his or her
employment with the Company for Good Reason and be entitled to the benefits set
forth in Section 5, provided that the Executive gives written notice to the
Administrator advising the Company of such resignation and the reason for such
resignation within sixty (60) days after the time he or she becomes aware of the
existence of facts or circumstances constituting Good Reason.
4.02 NOTICE OF TERMINATION. Any termination of the
Executive's employment by the Company or by the Executive (other than
termination based on the Executive's death) following a Change of Control shall
be communicated by the terminating party in a Notice of Termination to the other
party hereto.
5. COMPENSATION AND BENEFITS UPON TERMINATION OF EMPLOYMENT.
5.01 SEVERANCE BENEFITS. If there is a Change of
Control Termination, then the Executive shall receive the following severance
benefits. The severance benefits set forth below shall be in addition to any
amounts owed to Executive as earned but unpaid wages through the Date of
Termination and accrued but unused vacation through the Date of Termination:
(a) In lieu of any further severance payments to the
Executive except as expressly contemplated hereunder, payment in cash as
severance pay to the Executive an amount equal to the sum of (i) two (2.0) times
the Executive's annual base compensation plus (ii) 200% of the Executive's
annual target bonus as in effect for the calendar year in which the Change of
Control Termination occurs. For purposes of this Agreement, base salary shall be
defined as the greater of (i) the Executive's base salary at the time of the
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Change of Control or (ii) the Executive's base salary at the time of the Change
of Control Termination. Such cash payments shall be payable in a single sum,
within ten (10) business days following the Executive's Date of Termination.
(b) Any stock options granted to the Executive by the
Company that are outstanding immediately prior to but have not vested as of the
date of the Change of Control Termination shall become 100% vested as of the
date of the Change of Control Termination and may be exercised by the Executive
for one (1) year (notwithstanding any term of such option agreement providing
for exercise within a shorter period after termination) following the Date of
Termination (subject to the maximum term of the option (generally ten years from
the date of grant of the option) and further subject to any right that the
Company may have to terminate the options in connection with the Change of
Control).
(c) For a period of twenty-four (24) months following the
Executive's Date of Termination, the continuation of the same or equivalent
life, health, disability, vision, hospitalization, dental and other insurance
coverage (including equivalent coverage for the Executive's spouse and dependent
children) as the Executive was receiving immediately prior to the Change of
Control.
(d) For a period of twelve (12) months following Executive's
Date of Termination, the Company shall, at the Company's expense, provide for
executive-level outplacement services to Executive, which shall include at least
include the following services: (i) resume assistance, (ii) career evaluation
and assessment (iii) individual career counseling, (iv) financial counseling,
(v) access to one or more on-line employment databases (with research assistance
provided), (vi) private office with telephone, computer and e-mail account
set-up and (vii) administrative support provided Monday through Friday, except
for scheduled holidays.
(e) Equalization Payment. If upon or following a Change of
Control the tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), or any similar or successor tax (the "Excise Tax")
applies, because of the Change of Control, to any payments, benefits and/or
amounts received by Executive as severance benefits or otherwise, including,
without limitation, any amounts received or deemed received, within the meaning
of any provision of the Code, by Executive as a result of (and not by way of
limitation) any automatic vesting, lapse of restrictions and/or accelerated
target or performance achievement provisions, or otherwise, applicable to
outstanding grants or awards to Executive under any of the Company's equity
incentive plans or agreements (collectively, the "Total Payments"), the Company
shall pay in cash to Executive or for Executive's benefit as provided below an
additional amount or amounts (the "Gross-Up Payment(s)") such that the net
amount retained by Executive after the deduction or payment of any Excise Tax on
such Total Payments so received and any Federal, state and local income and
employment taxes and Excise Tax upon the Gross-Up Payment(s) provided for herein
shall be equal to such Total Payments so received had they not been subject to
the Excise Tax. Such Gross-Up Payment(s) shall be made by the Company to
Executive or applicable taxing authority on behalf of Executive as soon as
practicable following the receipt or deemed receipt of any portion of such Total
Payments so received, and may be satisfied by the Company making a
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payment or payments on Executive's account in lieu of withholding for tax
purposes but in all events shall be made within thirty (30) days of the
receipt or deemed receipt by Executive of any portion of such Total
Payments.
6. NO MITIGATION. The Executive shall not be required to mitigate the
amount of any payments provided for by this Agreement by seeking employment or
otherwise, nor shall the amount of any cash payments or benefits provided under
this Agreement be reduced by any compensation or benefits earned by the
Executive after his or her Date of Termination. Notwithstanding the foregoing,
if the Executive is entitled, by operation of any applicable law, to
unemployment compensation benefits or benefits under the Worker Adjustment and
Retraining Act of 1988 (known as the "WARN" Act) in connection with the
termination of his or her employment in addition to amounts required to be paid
to him or her under this Agreement, then to the extent permitted by applicable
statutory law governing severance payments or notice of termination of
employment, the Company shall be entitled to offset the amounts payable
hereunder by the amounts of any such statutorily mandated payments.
7. LIMITATION ON RIGHTS.
7.01 NO EMPLOYMENT CONTRACT. This Agreement shall not
be deemed to create a contract of employment between the Company and the
Executive and shall not create any right in the Executive to continue in the
Company's employment for any specific period of time. This Agreement shall not
restrict the right of the Company to terminate the employment of Executive for
any reason, or no reason at all, or restrict the right of the Executive to
terminate his or her employment.
7.02 NO OTHER EXCLUSIONS. This Agreement shall not be
construed to exclude the Executive from participation in any other compensation
or benefit programs in which he or she is specifically eligible to participate
either prior to or following the Effective Date of this Agreement, or any such
programs that generally are available to other executive personnel of the
Company.
8. DISPUTE RESOLUTION.
8.01 ARBITRATION. Any controversy arising out of or
relating to this Agreement, its enforcement, arbitrability or interpretation, or
because of an alleged breach, default, or misrepresentation in connection with
any of its provisions, or any other controversy arising out of or relating in
any way to the subject matter contained herein, shall be submitted to final and
binding arbitration. Any arbitration hereunder shall be in Santa Clara County,
California before a sole arbitrator selected from Judicial Arbitration and
Mediation Services, Inc., or its successor ("JAMS"), or if JAMS is no longer
able to supply the arbitrator, such arbitrator shall be selected from the
American Arbitration Association, and shall be conducted in accordance with the
provisions of California Code of Civil Procedure Sections 1280 et seq. as the
exclusive forum for the resolution of such dispute. Pursuant to California Code
of Civil Procedure Section 1281.8, provisional injunctive relief may, but need
not, be sought by either party to this Agreement in a court of law while
arbitration proceedings are pending, and any provisional injunctive relief
granted by such court shall remain effective until the matter is finally
determined by the Arbitrator. Final resolution of any dispute through
arbitration may include
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any remedy or relief which the Arbitrator deems just and equitable, including
any and all remedies provided by applicable state or federal statutes. At the
conclusion of the arbitration, the Arbitrator shall issue a written decision
that sets forth the essential findings and conclusions upon which the
Arbitrator's award or decision is based. Any award or relief granted by the
Arbitrator hereunder shall be final and binding on the parties hereto and may be
enforced by any court of competent jurisdiction. The parties acknowledge and
agree that they are hereby waiving any rights to trial by jury in any action,
proceeding or counterclaim brought by either of the parties against the other in
connection with any matter whatsoever arising out of or in any way connected
with this Agreement or the subject matter contained herein. The parties further
agree that in any proceeding to enforce the terms of this Agreement, the
nonprevailing party shall pay (1) the prevailing party's reasonable attorneys'
fees and costs incurred in connection with resolution of the dispute in addition
to any other relief granted, and (2) all costs of the arbitration, including,
but not limited to, the arbitrator's fees, court reporter fees, and any and all
other administrative costs of the arbitration, and that the nonprevailing party
promptly shall reimburse the prevailing party for any portion of such costs
previously paid by the prevailing party. The arbitrator shall resolve any
dispute as to the reasonableness of any fee or cost.
9. MISCELLANEOUS.
9.01 ADMINISTRATION. The Administrator shall administer
this Agreement and the benefits provided for herein.
9.02 ASSIGNMENT AND BINDING EFFECT.
(a) No right or interest to or in this Agreement, or any
payment or benefit to the Executive under this Agreement shall be
assignable by the Executive except by will or the laws of descent and
distribution. No right, benefit or interest of the Executive hereunder
shall be subject to anticipation, alienation, sale, assignment,
encumbrance, charge, pledge, hypothecation or set off in respect of any
claim, debt or obligation, or to execution, attachment, levy or similar
process or assignment by operation of law. Any attempt, voluntarily or
involuntarily, to effect any action specified in the immediately preceding
sentences shall, to the full extent permitted by law, be null, void and of
no effect; provided, however, that this provision shall not preclude the
Executive from designating one or more beneficiaries to receive any amount
that may be payable to the Executive under this Agreement after his or her
death and shall not preclude the legal representatives of the Executive's
estate from assigning any right hereunder to the person or persons
entitled thereto under his or her will, or, in the case of intestacy, to
the person or persons entitled thereto under the laws of intestacy
applicable to his or her estate. However, this Agreement shall be
assignable by the Company to, binding upon and inure to the benefit of any
successor of the Company, and any successor shall be deemed substituted
for the Company upon the terms and subject to the conditions hereof.
(b) The Company will require any successor (whether by
purchase of assets, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
expressly assume and agree to perform all of the obligations of the
Company under this Agreement (including the obligation to cause any
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subsequent successor to also assume the obligations of this Agreement)
unless such assumption occurs by operation of law.
9.03 NO WAIVER. No waiver of any term, provision or
condition of this Agreement, whether by conduct or otherwise, in any one or more
instances shall be deemed or construed as a further or continuing waiver of any
such term, provision or condition or as a waiver of any other term, provision or
condition of this Agreement. Without limiting the generality of the foregoing,
the failure by Executive to exercise his or her right to terminate his or her
employment for Good Reason under Section 4.01 above shall not operate as a
waiver by Executive of his or her right to terminate for Good Reason based upon
any subsequent act or omission of the Company that constitutes Good Reason.
9.04 RULES OF CONSTRUCTION.
(a) This Agreement has been executed in, and shall be
governed by and construed in accordance with the laws of the State of
California without regard to the principles of conflict of laws.
(b) Captions contained in this Agreement are for convenience
of reference only and shall not be considered or referred to in resolving
questions of interpretation with respect to this Agreement.
(c) If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, and if
the rights or obligations of any party hereto will not be materially or
adversely affected thereby, (i) such provision will be fully severable,
(ii) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force
and effect and will not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom and (iv) in lieu of
such illegal, invalid or unenforceable provision, there will be added
automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible.
(d) Each party has cooperated in the drafting and
preparation of this Agreement. Hence, in any construction to be made of
this Agreement, the same shall not be construed against any party on the
basis that the party was the drafter.
9.05 NOTICES. Any notice required or permitted by this
Agreement shall be in writing, delivered by hand or sent by registered or
certified mail, return receipt requested, postage prepaid, or by a nationally
recognized courier service (regularly providing proof of delivery) or by
facsimile or telecopy, addressed to the Board and the Company and, if other than
the Board, the Administrator, at the Company's then principal office, or to the
Executive at the address set forth in the records of the Company, as the case
may be, or to such other address or addresses the Company or the Executive may
from time to time specify in writing. Notices shall be deemed given: (i) when
delivered if delivered personally (including by courier); (ii) on the third day
after mailing, if mailed, postage prepaid, by registered or certified mail
(return receipt requested); (iii) on the day after mailing if sent by a
nationally recognized
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overnight delivery service which maintains records of the time, place, and
recipient of delivery; and (iv) upon receipt of a confirmed transmission, if
sent by telecopy or facsimile transmission.
9.06 MODIFICATION. This Agreement may be modified only
by an instrument in writing signed by the Executive and an authorized
representative of the Company.
9.07 ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement between the Company and the Executive concerning the subject
matter hereof, and supersedes all other agreements, whether written or oral,
with respect to such subject matter. This is an integrated agreement.
9.08 COUNTERPARTS. This Agreement may be executed in
counterparts, and each counterpart, when executed, shall have the efficacy of a
signed original. Photographic copies of such signed counterparts may be used in
lieu of the originals for any purpose.
9.09 GOOD FAITH DETERMINATIONS. No member of the Board
shall be liable, with respect to this Agreement, for any act, whether of
commission or omission, taken by any other member of the Board or by any
officer, agent, or employee of the Company, nor, excepting circumstances
involving his or her own bad faith, for anything done or omitted to be done by
himself or herself. The Company shall indemnify and hold harmless each member of
the Board from and against any liability or expense hereunder, except in the
case of such member's own bad faith.
SANDISK CORPORATION, EXECUTIVE
a Delaware corporation
By:
_______________________________________ ______________________________
Name: Sanjay Mehrotra Name: Eli Harari
Title: Executive Vice President and COO
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