SANDISK CORPORATION
1995 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
AMENDED AND RESTATED AS OF DECEMBER 17, 1998
ARTICLE One
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1995 Non-Employee Directors Stock Option Plan is intended to
promote the interests of SanDisk Corporation, a Delaware corporation, by
providing the non-employee members of the Board with the opportunity to acquire
a proprietary interest, or otherwise increase their proprietary interest, in the
Corporation as an incentive for them to remain in the service of the
Corporation.
Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
The terms of each option grant (including the timing and pricing of the
option grant) shall be determined by the express terms of the Plan, and neither
the Board nor any committee of the Board shall exercise any discretionary
functions with respect to option grants made pursuant to the Plan.
III. ELIGIBILITY
The individuals eligible to receive option grants under the Plan shall
be (i) those individuals who are serving as non-employee Board members on the
Effective Date or who are first elected or appointed as non-employee Board
members on or after such date, whether through appointment by the Board or
election by the Corporation's stockholders, and (ii) those individuals who
continue to serve as non-employee Board members after one or more Annual
Stockholders Meetings beginning with the 1996 Annual Meeting. A non-employee
Board member who has previously been in the employ of the Corporation (or any
Parent or Subsidiary) shall not be eligible to receive an option grant under the
Plan on the Effective Date or at the time he or she first becomes a non-employee
Board member, but shall be eligible to receive periodic option grants under the
Plan upon his or her continued service as a non-employee Board member following
one or more Annual Stockholders Meetings.
IV. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
which may be issued over the term of the Plan shall not exceed 400,000 shares.1
Such share reserve includes (i) the initial share reserve of 150,000 shares
approved by the stockholders in August 1995, (ii) an additional 50,000 share
increase authorized by the Board on February 10, 1997 and approved by
stockholders at the 1997 Annual Stockholders Meeting and (iii) an additional
200,000 share increase authorized by the Board on December 17, 1998, subject to
stockholder approval at the 1999 Annual Meeting. No shares of Common Stock shall
become exercisable under the Plan on the basis of the 200,000- share increase
unless that increase is approved by the stockholders at the 1999 Annual Meeting.
B. The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on the first trading day of January each
calendar year during the term of the Plan, beginning with calendar year 2002, by
an amount equal to two tenths of one percent (0.2%) of the shares of Common
Stock outstanding on the last trading day in December of the immediately
preceding calendar year, but in no event shall any such annual increase exceed
75,000 shares.
C. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent the options
expire or terminate for any reason prior to exercise in full. In addition,
unvested shares issued under the Plan and subsequently repurchased by the
Corporation, at the original exercise price paid per share, pursuant to the
Corporation's repurchase rights under the Plan shall be added back to the number
of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants under the Plan. However, shares subject to any option or portion thereof
surrendered in accordance with Article Two shall reduce on a share-for-share
basis the number of shares of Common Stock available for subsequent issuance
under the Plan. Should the exercise price of an option under the Plan be paid
with shares of Common Stock, then the number of shares of Common Stock available
for issuance under the Plan shall be reduced by the gross number of shares for
which the option is exercised, and not by the net number of shares of Common
Stock issued to the holder of such option.
D. Should any change be made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the maximum number and/or class of securities by which the share
reserve is to increase each calendar year pursuant to the provisions of Section
IV.B of this Article One, (iii) the number and/or class of securities for which
option grants are to be
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1 This number reflects the 2:3 stock split adopted by the Board on
July 25, 1995.
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subsequently made per Eligible Director and (iv) the number and/or class of
securities and the exercise price per share in effect under each outstanding
option in order to prevent the dilution or enlargement of benefits thereunder.
The adjustments to the outstanding options shall be made by the Board and shall
be final, binding and conclusive.
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ARTICLE Two
OPTION GRANT PROGRAM
I. OPTION TERMS
The provisions of this Article Two reflect the changes to the number of
shares of Common Stock subject to the initial and annual option grants to be
made to the non-employee Board members pursuant to the amendment authorized by
the Board on December 17, 1998, subject to stockholder approval at the 1999
Annual Meeting. Stockholder approval of such amendment shall constitute
pre-approval of each option grant made on or after the date of the 1999 Annual
Meeting to the non-employee Board members pursuant to the amended provisions of
this Article Two and the subsequent exercise of that option in accordance with
such provisions.
A. Grant Dates. Option grants shall be made on the dates specified below:
1. Each Eligible Director who is first elected or appointed as a
non-employee Board member on or after the date of the 1999 Annual Stockholders
Meeting shall automatically be granted, on the date of such initial election or
appointment (as the case may be), a Non-Statutory Option to purchase 32,000
shares of Common Stock.
2. On the date of each Annual Stockholders Meeting, beginning with the
1999 Annual Meeting, each individual who is to continue to serve as an Eligible
Director shall automatically be granted, whether or not such individual is
standing for re-election as a Board member at that Annual Meeting, a
Non-Statutory Option to purchase an additional 8,000 shares of Common Stock,
provided such individual has served as a non-employee Board member for at least
six (6) months prior to the date of such Annual Meeting. There shall be no limit
on the number of such 8,000-share option grants any one Eligible Director may
receive over his or her period of Board service.
B. Exercise Price.
1. The exercise price per share shall be equal to one hundred percent
(100%) of the Fair Market Value per share of Common Stock on the option grant
date.
2. The exercise price shall become immediately due upon exercise of the
option and shall be payable in one or more of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite period necessary
to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the
Exercise Date, or
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(iii) to the extent the option is exercised for vested shares,
through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable
written instructions to (A) a Corporation-designated brokerage
firm to effect the immediate sale of the purchased shares and
remit to the Corporation, out of the sale proceeds available
on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the purchased shares plus
all applicable Federal, state and local income and employment
taxes required to be withheld by the Corporation by reason of
such exercise and (B) the Corporation to deliver the
certificates for the purchased shares directly to such
brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
C. Option Term. Each option shall have a term of ten (10) years
measured from the option grant date.
D. Exercise and Vesting of Options. Each option shall be immediately
exercisable for any or all of the option shares. However, any shares purchased
under the option shall be subject to repurchase by the Corporation, at the
exercise price paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares. Each initial grant shall vest, and the
Corporation's repurchase right shall lapse, in a series of four (4) equal and
successive annual installments over the Optionee's period of continued service
as a Board member, with the first such installment to vest upon the Optionee's
completion of one (1) year of Board service measured from the option grant date.
Each annual grant shall vest, and the Corporation's repurchase right shall
lapse, upon the Optionee's completion of one (1) year of Board service measured
from the option grant date.
E. Effect of Termination of Board Service. The following provisions
shall govern the exercise of any options held by the Optionee at the time the
Optionee ceases to serve as a Board member:
(i) The Optionee (or, in the event of Optionee's death, the
personal representative of the Optionee's estate or the person
or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and
distribution) shall have a twelve (12)-month period following
the date of such cessation of Board service in which to
exercise each such option.
(ii) During the twelve (12)-month exercise period, the option may
not be exercised in the aggregate for more than the number of
vested shares for which the option is exercisable at the time
of the Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board member by reason
of death or Permanent Disability, then all shares at the time
subject to the option shall immediately vest so that such
option may, during the twelve (12)-month exercise period
following such cessation of Board service, be exercised for
all or any portion of such shares as fully-vested shares.
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(iv) In no event shall the option remain exercisable after the
expiration of the option term. Upon the expiration of the
twelve (12)-month exercise period or (if earlier) upon the
expiration of the option term, the option shall terminate and
cease to be outstanding for any vested shares for which the
option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Board service,
terminate and cease to be outstanding to the extent it is not
exercisable for vested shares on the date of such cessation of
Board service.
F. Stockholder Rights. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
G. Limited Transferability of Options. An automatic option granted
under the Plan may, in connection with the Optionee's estate plan, be assigned
in whole or in part during the Optionee's lifetime to one or more members of the
Optionee's immediate family or to a trust established exclusively for one or
more such family members. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the option pursuant to
the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the specified effective date of the Corporate Transaction, become fully
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for all or any portion of such shares as
fully-vested shares of Common Stock. Immediately following the consummation of
the Corporate Transaction, each option grant shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
B. In connection with any Change in Control, the shares of Common Stock
at the time subject to each outstanding option but not otherwise vested shall
automatically vest in full so that each such option shall, immediately prior to
the effective date of the Change in Control, become fully exercisable for all of
the shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of such shares as fully-vested shares of Common
Stock. Each such option shall remain exercisable for such fully-vested option
shares until the expiration of the option term or the surrender of the option in
connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have
a thirty (30)-day period in which to surrender to the Corporation each option
held by him or her. The Optionee shall in return be entitled to a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Take-Over Price of the shares of Common Stock at the time subject
to the surrendered option (whether or not the Optionee is otherwise at the time
vested in those shares) over (ii) the aggregate exercise price payable for such
shares. Such cash distribution shall be paid within five (5) days following the
surrender of the option to the Corporation. Stockholder approval of the December
17, 1998 amendment and restatement of the Plan shall constitute pre-approval of
each option surrender right subsequently granted under the Plan and the
subsequent exercise of that right in accordance with the terms and provisions of
this Section II.C. No additional approval of the Board or any committee of the
Board shall be required at the time of the actual option surrender and cash
distribution.
D. The grant of options under the Plan shall in no way affect the right
of the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
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ARTICLE Three
MISCELLANEOUS
I. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan became effective on the November 7, 1995 Effective Date
after adoption by the Board on July 25, 1995 and approval by the Corporation's
stockholders in August 1995.
B. The Plan was amended on February 10, 1997 (the "February 1997
Amendment") to effect the following changes: (i) increase the number of shares
of Common Stock authorized for issuance over the term of the Plan by an
additional 50,000 shares, (ii) allow unvested shares issued under the Plan and
subsequently repurchased by the Corporation at the option exercise price paid
per share to be reissued under the Plan and (iii) effect a series of technical
changes to the provisions of the Plan (including stockholder approval
requirements) in order to take advantage of the recent amendments to Rule 16b-3
of the Securities Exchange Act of 1934 which exempts certain officer and
director transactions under the Plan from the short-swing liability provisions
of the Federal securities laws. The February 1997 Amendment was approved by the
stockholders at the 1997 Annual Meeting. The Plan was amended on December 17,
1998 (the "December 1998 Amendment") to effect the following changes: (i)
increase the number of shares of Common Stock authorized for issuance over the
term of the Plan by an additional 200,000 shares, (ii) implement the automatic
share increase provisions of Section IV.B of Article One, (iii) increase the
size of the initial grants to non-employee Board members from 16,000 to 32,000
shares of Common Stock and (iv) increase the size of the annual grants to
non-employee Board members from 4,000 to 8,000 shares of Common Stock. No option
grants made on the basis of the 200,000-share increase authorized by the
December 1998 Amendment shall become exercisable in whole or in part unless and
until that amendment is approved by the stockholders. Should such stockholder
approval not be obtained at the 1999 Annual Meeting, then each option grant made
pursuant to the 200,000-share increase authorized by the December 1998 Amendment
shall terminate and cease to remain outstanding, no further option grants shall
be made on the basis of that share increase, and the automatic share increase
provisions of Section IV.B of Article One shall not be implemented. However, the
provisions of the Plan as in effect immediately prior to the December 1998
Amendment shall automatically be reinstated, and option grants may thereafter
continue to be made pursuant to the reinstated provisions of the Plan. All
option grants made prior to the December 1998 Amendment shall remain outstanding
in accordance with the terms and conditions of the respective instruments
evidencing those options or issuances, and nothing in the December 1998
Amendment shall be deemed to modify or in any way affect those outstanding
options or issuances. Subject to the foregoing limitations, options may be
granted under the Plan at any time before the date fixed herein for the
termination of the Plan.
C. The Plan shall terminate upon the earliest of (i) July 24, 2005,
(ii) the date on which all shares available for issuance under the Plan shall
have been issued or cancelled pursuant to the exercise or cash-out of the
options under the Plan or (iii) the termination of all outstanding options in
connection with a Corporate Transaction. Upon such Plan termination, all
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option grants and unvested stock issuances outstanding on such date shall
thereafter continue to have force and effect in accordance with the provisions
of the documents evidencing such grants or issuances.
II. AMENDMENT OF THE PLAN
The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee consents to such amendment or modification. In addition,
certain amendments may require stockholder approval pursuant to applicable laws
or regulations.
III. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.
IV. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option under the
Plan and the issuance of any shares of Common Stock upon the exercise of any
option shall be subject to the Corporation's procurement of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan,
the options granted under it and the shares of Common Stock issued pursuant to
it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
V. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) and the Corporation's
stockholders or of the Optionee, which rights are hereby expressly reserved by
each, to terminate such person's Service at any time for any reason, with or
without cause.
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APPENDIX
The following definitions shall be in effect under the Plan:
A. Board shall mean the Corporation's Board of Directors.
B. Change in Control shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation), of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange
offer made directly to the Corporation's stockholders; or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have
been Board members continuously since the beginning of such period or
(B) have been elected or nominated for election as Board members during
such period by at least a majority of the Board members described in
clause (A) who were still in office at the time such election or
nomination was approved by the Board.
C. Code shall mean the Internal Revenue Code of 1986, as amended.
D. Common Stock shall mean the Corporation's common stock.
E. Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those immediately prior to
such transaction; or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
F. Corporation shall mean SanDisk Corporation, a Delaware corporation.
G. Effective Date shall mean November 7, 1995, the date on which the
Underwriting Agreement was executed and the initial public offering price of the
Common Stock was established.
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H. Eligible Director shall mean a non-employee Board member eligible to
participate in the Plan.
I. Exercise Date shall mean the date on which the Corporation shall
have received written notice of the option exercise.
J. Fair Market Value per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or any successor system. If there
is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price
on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question on the Stock Exchange
which serves as the primary market for the Common Stock, as such price
is officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation
exists.
K. Hostile Take-Over shall mean a change in ownership of the
Corporation through the direct or indirect acquisition by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the
1934 Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's stockholders which
the Board does not recommend such stockholders to accept.
L. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
M. Non-Statutory Option shall mean an option not intended to satisfy
the requirements of Code Section 422.
N. Optionee shall mean any person to whom an option is granted under
the Plan.
O. Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
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P. Permanent Disability shall mean the inability of the Optionee to
perform his or her usual duties as a Board member by reason of any medically
determinable physical or mental impairment expected to result in death or to be
of continuous duration of twelve (12) months or more.
Q. Plan shall mean the Corporation's 1995 Non-Employee Directors Stock
Option Plan, as set forth in this document.
R. Section 16 Insiders shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
S. Stock Exchange shall mean either the American Stock Exchange or the
New York Stock Exchange.
T. Subsidiary shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
U. Take-Over Price shall mean the greater of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over.
V. Underwriting Agreement shall mean the agreement between the
Corporation and the underwriter or underwriters which managed the initial public
offering of the Common Stock.
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