SANDISK CORPORATION
140 Caspian Court
Sunnyvale, California 94089
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
(the "Annual Meeting") of SanDisk Corporation (the "Company") which will be held
on April 30, 1998 at 9:00 a.m., local time, at the Company's headquarters, 140
Caspian Court, Sunnyvale, California 94089.
At the Annual Meeting, you will be asked to consider and vote upon the
following proposals: (i) to elect seven (7) directors of the Company, (ii) and
(ii) to ratify the appointment of Ernst & Young LLP as independent accountants
of the Company for the fiscal year ending December 27, 1998.
The enclosed Proxy Statement more fully describes the details of the
business to be conducted at the Annual Meeting. After careful consideration, the
Company's Board of Directors has unanimously approved the proposals and
recommends that you vote FOR each such proposal.
After reading the Proxy Statement, please mark, date, sign and return
the enclosed proxy card in the accompanying reply envelope as promptly as
possible but no later than April 30, 1998. If you decide to attend the Annual
Meeting and would prefer to vote in person, please notify the Secretary of the
Company that you wish to vote in person and your proxy will not be voted. YOUR
SHARES CANNOT BE VOTED UNLESS YOU SIGN, DATE AND RETURN THE ENCLOSED PROXY OR
ATTEND THE ANNUAL MEETING IN PERSON.
A copy of the Company's 1997 Annual Report has been mailed concurrently
herewith to all stockholders entitled to notice of and to vote at the Annual
Meeting.
We look forward to seeing you at the Annual Meeting.
Sincerely yours,
/s/ Eli Harari
Eli Harari
President and Chief Executive Officer
Sunnyvale, California
March 23, 1998
- --------------------------------------------------------------------------------
IMPORTANT
Please mark, date and sign the enclosed proxy and return it at your earliest
convenience in the enclosed postage-prepaid return envelope so that if you are
unable to attend the Annual Meeting, your shares may be voted.
- --------------------------------------------------------------------------------
<PAGE>
SANDISK CORPORATION
140 Caspian Court
Sunnyvale, California 94089
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 30, 1998
TO OUR STOCKHOLDERS:
You are cordially invited to attend the Annual Meeting of Stockholders
(the "Annual Meeting") of SanDisk Corporation, a Delaware corporation (the
"Company"), to be held on April 30, 1998 at 9:00 a.m., local time, at the
Company's headquarters, 140 Caspian Court, Sunnyvale, California 94089, for the
following purposes:
1. To elect 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, William V. Campbell, Catherine
P. Lego, Dr. James D. Meindl, Joseph Rizzi and Alan F. Shugart.
2. To ratify the appointment of Ernst & Young LLP as independent
accountants of the Company for the fiscal year ending December 27,
1998.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement that accompanies this Notice.
Only stockholders of record at the close of business on March 2, 1998
are entitled to notice of and to vote at the Annual Meeting and at any
continuation or adjournment thereof. A list of stockholders entitled to vote at
the Annual Meeting will be available for inspection at the executive offices of
the Company.
All stockholders are cordially invited and encouraged to attend the
Annual Meeting. In any event, to assure your representation at the meeting,
please carefully read the accompanying Proxy Statement which describes the
matters to be voted on at the Annual Meeting and sign, date and return the
enclosed proxy card in the reply envelope provided. Should you receive more than
one proxy because your shares are registered in different names and addresses,
each proxy should be returned to assure that all your shares will be voted. If
you attend the Annual Meeting and vote by ballot, your proxy will be revoked
automatically and only your vote at the Annual Meeting will be counted. The
prompt return of your proxy card will assist us in preparing for the Annual
Meeting.
We look forward to seeing you at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Cindy Burgdorf
CINDY BURGDORF
Chief Financial Officer, Senior Vice President, Finance and
Administration and Secretary
Sunnyvale, California
March 23, 1998
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN
PERSON. IN ANY EVENT, TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU
ARE URGED TO VOTE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN
THE POSTAGE-PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE.
<PAGE>
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS OF
SANDISK CORPORATION
TO BE HELD APRIL 30, 1998
GENERAL
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of SanDisk Corporation, a Delaware corporation (the
"Company" or "SanDisk"), of proxies to be voted at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held on April 30, 1998, or at any
adjournment or postponement thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders. Stockholders of record on
March 2, 1998 will be entitled to vote at the Annual Meeting. The Annual Meeting
will be held at 9:00 a.m., local time, at the Company's headquarters, 140
Caspian Court, Sunnyvale, California 94089.
It is anticipated that this Proxy Statement and the enclosed proxy card
will be first mailed to stockholders on or about March 30, 1998.
VOTING RIGHTS
The close of business on March 2, 1998 was the record date for
stockholders entitled to notice of and to vote at the Annual Meeting and any
adjournments thereof. At the record date, the Company had approximately
26,125,986 shares of its Common Stock outstanding and entitled to vote at the
Annual Meeting, held by approximately 251 stockholders. Holders of Common Stock
are entitled to one vote for each share of Common Stock so held. In the election
of Directors, however, cumulative voting is authorized for all stockholders if
any stockholder gives notice at the meeting, prior to voting for the election of
Directors, of his or her intention to cumulate votes. Under cumulative voting, a
stockholder may cumulate votes and give to one nominee a number of votes equal
to the number of Directors to be elected (seven at this meeting) multiplied by
the number of votes to which such stockholder is entitled, or may distribute
such number among any or all of the nominees. The seven candidates receiving the
highest number of votes will be elected. The Board of Directors is soliciting
discretionary authority to vote proxies cumulatively. A majority of the shares
of Common Stock entitled to vote will constitute a quorum for the transaction of
business at the Annual Meeting.
If any stockholder is unable to attend the Annual Meeting, such
stockholder may vote by proxy. The enclosed proxy is solicited by the Company's
Board of Directors, (the "Board of Directors" or the "Board") and, when the
proxy card is returned properly completed, it will be voted as directed by the
stockholder on the proxy card. Stockholders are urged to specify their choices
on the enclosed proxy card. If a proxy card is signed and returned without
choices specified, in the absence of contrary instructions, the shares of Common
Stock represented by such proxy will be voted FOR Proposals 1 and 2 and will be
voted in the proxy holders' discretion as to other matters that may properly
come before the Annual Meeting.
An affirmative vote of a plurality of the shares present or represented
at the meeting and entitled to vote is required for the election of directors.
An affirmative vote of a majority of the shares present or represented at the
meeting and entitled to vote is required for the ratification of appointment of
Ernst & Young LLP as independent accountants of the Company. An automated system
administered by the Company's transfer agent tabulates stockholder votes.
Abstentions and broker non-votes each are included in determining the number of
shares present and voting at the Annual Meeting for purposes of determining the
presence or absence of a quorum, and each is tabulated separately. Abstentions
are counted as negative votes, whereas broker non-votes are not counted for
purposes of determining whether Proposals 1 or 2 presented to stockholders have
been approved.
1
<PAGE>
REVOCABILITY OF PROXIES
Any person giving a proxy has the power to revoke it at any time before
its exercise. A proxy may be revoked by filing with the Secretary of the Company
an instrument of revocation or a duly executed proxy bearing a later date, or by
attending the Annual Meeting and voting in person.
SOLICITATION OF PROXIES
The Company will bear the cost of soliciting proxies. Copies of
solicitation material will be furnished to brokerage houses, fiduciaries, and
custodians holding shares in their names that are beneficially owned by others
to forward to such beneficial owners. The Company may reimburse such persons for
their costs of forwarding the solicitation material to such beneficial owners.
The original solicitation of proxies by mail may be supplemented by solicitation
by telephone, telegram, or other means by directors, officers, employees or
agents of the Company. No additional compensation will be paid to these
individuals for any such services. Except as described above, the Company does
not intend to solicit proxies other than by mail.
THE ANNUAL REPORT OF THE COMPANY FOR THE FISCAL YEAR ENDED DECEMBER 28,
1997, HAS BEEN MAILED CONCURRENTLY WITH THE MAILING OF THE NOTICE OF ANNUAL
MEETING AND PROXY STATEMENT TO ALL STOCKHOLDERS ENTITLED TO NOTICE OF AND TO
VOTE AT THE ANNUAL MEETING. THE ANNUAL REPORT IS NOT INCORPORATED INTO THIS
PROXY STATEMENT AND IS NOT CONSIDERED PROXY SOLICITING MATERIAL.
2
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-----------------------------------
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
-----------------------------------
At the Annual Meeting, seven directors (constituting the entire board)
are to be elected to serve until the next Annual Meeting of Stockholders and
until a successor for such director is elected and qualified, or until the
death, resignation, or removal of such director. It is intended that the proxies
will be voted for the seven nominees named below for election to the Company's
Board of Directors unless authority to vote for any such nominee is withheld.
There are seven nominees, each of whom is currently a director of the Company.
All of the current directors were elected to the Board by the stockholders at
the last annual meeting. Each person nominated for election has agreed to serve
if elected, and the Board of Directors has no reason to believe that any nominee
will be unavailable or will decline to serve. In the event, however, that any
nominee is unable or declines to serve as a director at the time of the Annual
Meeting, the proxies will be voted for any nominee who is designated by the
current Board of Directors to fill the vacancy. Unless otherwise instructed, the
proxyholders will vote the proxies received by them FOR the nominees named
below. The seven candidates receiving the highest number of the affirmative
votes of the shares entitled to vote at the Annual Meeting will be elected
directors of the Company. The proxies solicited by this Proxy Statement may not
be voted for more than seven nominees.
NOMINEES
Set forth below is information regarding the nominees to the Board of
Directors.
Name Position(s) with the Age First Elected
Company Director
------------------------- -------------------------- --- --------------
Dr. Eli Harari .......... President, Chief Executive 52 1988
Officer and Director
Irwin Federman(1)........ Chairman of the Board 62 1988
William V. Campbell(2)... Director 57 1993
Catherine P. Lego(1)..... Director 41 1989
Dr. James D. Meindl...... Director 64 1989
Joseph Rizzi(3).......... Director 55 1992
Alan F. Shugart(2)....... Director 67 1993
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of the Audit Committee as of January 1998
3
<PAGE>
BUSINESS EXPERIENCE OF NOMINEES FOR ELECTION AS DIRECTORS
Dr. Harari, the founder of the Company, has served as the President and
Chief Executive Officer and as a director of the Company since June 1988. Dr.
Harari founded Wafer Scale Integration, a privately held semiconductor company,
in 1983 and was its President and Chief Executive Officer from 1983 to 1986, and
Chairman and Chief Technical Officer from 1986 to 1988. From 1973 to 1983, Dr.
Harari held various management positions with Honeywell Inc., Intel and Hughes
Aircraft Microelectronics. Dr. Harari holds a Ph.D. degree in Solid State
Sciences from Princeton University.
Mr. Federman has served as Chairman of the Board of Directors since
September 1988. Since April 1990, Mr. Federman has been a general partner in
U.S. Venture Partners, a venture capital firm. From 1988 to 1990, he was a
Managing Director of Dillon Read & Co., an investment banking firm, and a
general partner in its venture capital affiliate, Concord Partners. From August
1987 to December 1987, Mr. Federman was Vice Chairman of AMD, which acquired
Monolithic Memories, a corporation engaged in the production of integrated
circuits, with which he was affiliated for 16 years. From 1979 to 1987, Mr.
Federman was President of Monolithic Memories. Mr. Federman served as Chairman
of the Semiconductor Industry Association from 1986 to 1988. He is also a
director of Komag Incorporated, Western Digital Corporation, NeoMagic, Inc.,
Checkpoint Software Technologies, Inc., MMC Networks, Inc. and various private
corporations. Mr. Federman holds a B.S. degree from Brooklyn College.
Mr. Campbell has served as a director of the Company since October
1993. Mr. Campbell has been President and Chief Executive Officer and a director
of Intuit Inc. since April 1994. From 1991 to 1993, Mr. Campbell was President
and Chief Executive Officer of GO Corporation, a pen-based computing software
company. From 1987 to 1991, Mr. Campbell was President and Chief Executive
Officer of Claris Corporation, a software subsidiary of Apple Computer Inc. Mr.
Campbell holds both B.A. and M.A. degrees in Economics from Columbia University.
Ms. Lego has served as a director of the Company since March 1989. Ms.
Lego has been self-employed with her consulting firm, Lego Ventures, since 1992.
From 1981 to 1992, Ms. Lego held various positions with Oak Investment Partners,
a venture capital firm and was general partner of several of the venture capital
partnerships affiliated with Oak Investment Partners. Ms. Lego also serves as a
director of Uniphase Corporation, Zitel Corporation and various private
corporations. Ms. Lego is a Certified Public Accountant and holds a B.A. degree
in Economics and Biology from Williams College and an M.S. degree in Accounting
from the New York University Graduate School of Business.
Dr. Meindl has served as a director of the Company since March 1989.
Dr. Meindl has been the Joseph M. Pettit Chair Professor of Microelectronics at
the Georgia Institute of Technology in Atlanta, Georgia since 1993. From 1986 to
1993, Dr. Meindl served as Senior Vice President for Academic Affairs and
Provost of Rensselaer Polytechnic Institute. From 1967 to 1986, he was the John
M. Fluke Professor of Electrical Engineering at Stanford University. Dr. Meindl
serves as a director of Zoran, Inc. and Digital Microwave. Dr. Meindl holds
B.S., M.S. and Ph.D. degrees in Electrical Engineering from Carnegie-Mellon
University.
Mr. Rizzi has served as a director of the Company since February 1992.
Mr. Rizzi has been a general partner of Matrix II L.P. and Matrix III L.P. since
1986. From 1979 to 1986, Mr. Rizzi was Chief Executive Officer of ELXSI Inc., of
which is he is a founder. From 1969 to 1978, Mr. Rizzi was Vice President of
Intersil Inc., of which he is a founder. Mr. Rizzi also serves as a director of
Veritas Software, Inc., Microlinear Corporation and Overland Data, Inc. Mr.
Rizzi holds B.S. and M.S. degrees in Electrical Engineering from the University
of New Hampshire.
Mr. Shugart has served as a director of the Company since January 1993.
Mr. Shugart has served as Chief Executive Officer of Seagate since its inception
in 1979, President of Seagate since September 1991 and Chairman of the Board of
Directors of Seagate since October 1992. He also served as Chairman of the Board
of Directors of Seagate from its inception until September 1991 and Chief
Operating Officer of Seagate from September 1991 to March 1995. Mr. Shugart is
also a director of Valence Technology, Inc. Mr. Shugart holds a B.S. degree in
Engineering/Physics from the University of Redlands.
4
<PAGE>
BOARD MEETINGS AND COMMITTEES
The Board of Directors held nine (9) meetings during fiscal 1997. Each
member of the Board of Directors during fiscal 1997 attended or participated in
more than seventy-five (75%) or more of the aggregate of (i) the total number of
meetings of the Board of Directors held during the fiscal year and (ii) the
total number of meetings held by all committees on which such director served
during the past fiscal year, except Dr. Meindl (who attended sixty-six percent
(66% of such meetings). There are no family relationships among executive
officers or directors of the Company. The Board of Directors has an Audit
Committee and a Compensation Committee.
The Audit Committee of the Board of Directors held two meetings during
fiscal 1997. The Audit Committee, which is currently comprised of Directors
Federman and Lego, recommends engagement of the Company's independent
accountants, approves services performed by such accountants and reviews and
evaluates the Company's accounting system and its system of internal controls.
The Compensation Committee of the Board of Directors held three
meetings during fiscal 1997 and approved grants of options by written consent on
a monthly basis. The Compensation Committee, which is comprised of Directors
Campbell and Shugart, has overall responsibility for the Company's compensation
policies and determines the compensation payable to the Company's executive
officers, including their participation in certain of the Company's employee
benefit and stock option plans.
DIRECTOR COMPENSATION
Board members do not receive compensation for their services as a
director. Board members are also not compensated for their service on Board
committees or their performance of special assignments. However, the
non-employee Board members are eligible to receive periodic option grants under
the 1995 Non-Employee Directors Stock Option Plan (the "Directors Plan"). In
addition, Dr. Meindl is paid $10,000 per annum in his capacities as Senior
Technical advisor to the Company, and Ms. Lego is paid $10,000 per annum in her
capacity as Financial Advisor to the Company.
Under the Directors Plan, each individual will, upon his or her initial
election or appointment to the Board as a non-employee Board member, will
receive an option grant for 16,000 shares of the Company's common stock,
provided such individual has not been previously employed by the Company. In
addition, on the date of each Annual Stockholders Meeting, each individual who
is to continue to serve as a non-employee Board member, whether or not that
individual has been previously employed by the Company, will receive an option
grant to purchase 4,000 shares of Common Stock, provided such individual has
served as a non-employee Board member for at least six months. Each of the
following non-employee Board members received an option grant for 4,000 shares
on April 18, 1997, the date of the 1997 Annual Stockholders Meeting, at an
exercise price of $11.125 per share: Messrs. Federman, Campbell, Meindl, Rizzi
and Shugart and Ms. Lego.
Each automatic grant will have an exercise price per share equal to the
fair market value per share of Common Stock on the grant date and will have a
maximum term of 10 years, subject to earlier termination following the
optionee's cessation of Board service. Each automatic option will be immediately
exercisable for any or all of the option shares; however, any shares purchased
under the option will be subject to repurchase by the Company, at the option
exercise price paid per share, should the optionee cease service as a Board
member prior to vesting in those shares. The shares subject to each initial
16,000 share grant will vest in four successive equal annual installments over
the optionee's period of Board service, with the first installment to vest upon
the Board member's completion of one year of Board service measured from the
grant date. The shares subject to each 4,000 share grant will vest upon the
optionee's completion of one year of Board service measured from the grant date.
However, the shares subject to each outstanding option will immediately vest
upon (i) certain changes in the ownership or control of the Company or (ii) the
death or disability of the optionee while serving as a Board member. In
addition, each automatic option grant may, upon the successful completion of a
hostile tender offer for more than fifty percent (50%) of the Company's
outstanding common stock, be surrendered to the Company for a cash distribution
per surrendered option share equal to the excess of (i) the highest price per
share of common stock paid in connection with such tender offer over (ii) the
exercise price payable per share.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF ALL OF THE ABOVE NOMINEES.
5
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------------------------------------------------------------
PROPOSAL NO. 2:
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
------------------------------------------------------------
The Company is asking the stockholders to ratify the selection of Ernst
& Young LLP as the Company's independent public accountants for the fiscal year
ending December 27, 1998. The affirmative vote of the holders of a majority of
the shares represented and voting at the Annual Meeting will be required to
ratify the selection of Ernst & Young LLP.
In the event the stockholders fail to ratify the appointment, the Audit
Committee of the Board of Directors will consider it as a direction to select
other auditors for the subsequent year. Even if the selection is ratified, the
Board of Directors in its discretion may direct the appointment of a different
independent accounting firm at any time during the year if the Board of
Directors determines that such a change would be in the best interest of the
Company and its stockholders.
Ernst & Young LLP has audited the Company's financial statements
annually since 1991. Its representatives are expected to be present at the
Annual Meeting, will have the opportunity to make a statement if they desire to
do so, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
PROPOSAL TO RATIFY THE SELECTION OF ERNST & YOUNG LLP TO SERVE AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 27, 1998.
6
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of March 2, 1998 by (i) all persons
known by the Company to be beneficial owners of five percent (5%) or more of its
outstanding Common Stock, (ii) each director of the Company and each nominee for
director, (iii) the Chief Executive Officer and each of the four most highly
compensated executive officers of the Company serving as such as of the end of
the last fiscal year whose compensation for such year was in excess of $100,000,
and (iv) all executive officers and directors of the Company as a group.
Amount and Nature of
Beneficial Ownership(1)
Name or Group of Beneficial Owners Number Percent
of Shares Owned(2)
--------- --------
Seagate Technology, Inc.......................... 6,141,374 23.50%
920 Disc Drive
Scotts Valley, CA 95066
FMR Corp.(3)..................................... 2,007,900 7.68
82 Devonshire Street
Boston, MA 02109
William Campbell(4).............................. 47,608 *
Irwin Federman(5)................................ 57,686 *
Catherine P. Lego(6)............................. 64,037 *
Dr. Eli Harari(7)................................ 1,298,435 4.96
Dr. James D. Meindl(8)........................... 65,665 *
Joseph Rizzi(9).................................. 42,333 *
Alan F. Shugart(10).............................. 6,165,374 23.59
Daniel Auclair(11)............................... 179,830 *
Cindy Burgdorf(12)............................... 177,445 *
Leon Malmed(13).................................. 146,159 *
Marianne Jackson(14)............................. 49,343 *
All directors and executive officers as a group
(11 persons)(15)................................. 8,293,915 31.74
* Less than 1% of the outstanding Common Stock
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of Common
Stock. The number of shares beneficially owned includes Common Stock of
which such individual has the right to acquire beneficial ownership
either currently or within 60 days after March 2, 1998, including, but
not limited to, upon the exercise of an option.
(2) Percentage of beneficial ownership is based upon 26,125,986 shares of
Common Stock, all of which were outstanding on March 2, 1998. For each
individual, this percentage includes Common Stock of which such
individual has the right to acquire beneficial ownership either currently
or within 60 days after March 2, 1998, including, but not limited to,
upon the exercise of an option; however, such Common Stock will not be
deemed outstanding for the purpose of computing the percentage owned by
any other individual. Such calculation is
7
<PAGE>
required by General Rule 13d-3(d)(1)(i) under the Securities Exchange Act
of 1934. Based upon a review of 13G filings made with the Securities and
Exchange Commission during 1997, the table above includes all greater
than 5% stockholders.
(3) Based on a Schedule 13G filed with the SEC in February 1998.
(4) Includes 8,000 shares owned by Mr. Campbell in the form of immediately
exercisable options, some of which, if exercised and issued, would be
subject to a repurchase right of the Company that lapses over time.
(5) Includes 24,000 shares owned by Mr. Federman in the form of immediately
exercisable options, some of which, if exercised and issued, would be
subject to a repurchase right of the Company that lapses over time.
(6) Includes 8,000 shares owned by Ms. Lego in the form of immediately
exercisable options, some of which, if exercised and issued, would be
subject to a repurchase right of the Company that lapses over time.
(7) Includes 1,120,840 shares held in the name of a trust for the benefit of
Dr. Harari and his wife. Also includes 156,769 shares owned by Dr. Harari
in the form of immediately exercisable options, some of which, if
exercised and issued, would be subject to a repurchase right of the
Company that lapses over time. Also includes 13,333 shares owned directly
by his son and 7,493 shares held in the name of a trust for the benefit
of his children.
(8) Represents 57,665 shares held as community property in the name of Dr.
Meindl and his wife. Also includes 8,000 shares owned by Mr. Meindl in
the form of immediately exercisable options, some of which, if exercised
and issued, would be subject to a repurchase right of the Company that
lapses over time.
(9) Includes 24,000 shares owned by Mr. Rizzi in the form of immediately
exercisable options, some of which, if exercised and issued, would be
subject to a repurchase right of the Company that lapses over time.
(10) Includes 24,000 shares owned by Mr. Shugart in the form of immediately
exercisable options, some of which, if exercised and issued, would be
subject to a repurchase right of the Company that lapses over time.
Represents 6,141,374 shares beneficially owned by Seagate Technology,
Inc. ("Seagate"). Mr. Shugart is Chairman of the Board, President and
Chief Executive Officer of Seagate. Mr. Shugart disclaims beneficial
ownership of the securities held by Seagate.
(11) Includes 137,706 shares owned by Mr. Auclair in the form of immediately
exercisable options, some of which, if exercised and issued, would be
subject to a repurchase right of the Company that lapses over time.
Includes an aggregate of 5,540 shares owned by his children held in his
name as custodian.
(12) Includes 169,374 shares owned by Ms. Burgdorf in the form of immediately
exercisable options, some of which, if exercised and issued, would be
subject to a repurchase right of the Company that lapses over time.
(13) Includes 134,774 shares owned by Mr. Malmed in the form of immediately
exercisable options, some of which, if exercised and issued, would be
subject to a repurchase right of the Company that lapses over time.
(14) Includes 48,936 shares owned by Ms. Jackson in the form of immediately
exercisable options, some of which, if exercised and issued, would be
subject to a repurchase right of the Company that lapses over time.
(15) Includes 743,559 shares subject to options, including those identified in
notes (4), (5), (6), (7), (8), (9), (10), (11), (12), (13) and (14).
8
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES ACT OF 1934
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent (10%) of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission (the "SEC") initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than ten percent
(10%) stockholders are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Based upon (i) the copies of Section 16(a) reports which the Company
received from such persons for their 1997 fiscal year transactions in the Common
Stock and their Common Stock holdings, and (ii) the written representations
received from one or more of such persons that no annual Form 5 reports were
required to be filed by them for the 1997 fiscal year, the Company believes that
all executive officers and Board members complied with all their reporting
requirements under Section 16(a) for such fiscal year.
FORM 10-K
The Company filed an Annual Report on Form 10-K with the Securities and
Exchange Commission on or about March 23, 1998. Stockholders may obtain a copy
of this report, without charge, by writing to Cindy Burgdorf, Chief Financial
Officer, Senior Vice-President, Finance and Administration and Secretary of the
Company, at the Company's principal executive offices located at 140 Caspian
Court, Sunnyvale, California 94089.
9
<PAGE>
EXECUTIVE COMPENSATION AND RELATED INFORMATION
Summary of Cash and Certain Other Compensation
The following table provides certain summary information concerning the
compensation earned, by (i) the Company's Chief Executive Officer and (ii) each
of the four other most highly compensated executive officers of the Company
whose compensation was in excess of $100,000 for the 1997 fiscal year, for
services rendered in all capacities to the Company and its subsidiaries for each
of the last three fiscal years. Such individuals will be hereafter referred to
as the Named Executive Officers. No other executive officer who would have
otherwise been includible in such table on the basis of salary and bonus earned
for the 1997 fiscal year has resigned or terminated employment during that
fiscal year.
<TABLE>
Summary Compensation Table
Long-Term
Compensation All Other
Annual Compensation Awards Compensation
--------------------------------- ---------- ------------
Securities
Name and Principal Underlying
Position Years Salary($)(1) Bonus($)(2) Options(#)
- ------------------------------ ----- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Dr. Eli Harari 1997 $ 272,458 $ 130,992 100,000 $ 0
President and Chief 1996 $ 232,875 $ 130,992 75,000 $ 0
Executive Officer 1995 $ 217,498 $ 171,105 66,666 $ 0
Cindy Burgdorf 1997 $ 189,212 $ 54,806 25,000 $ 0
Chief Financial Officer, 1996 $ 174,477 $ 45,800 30,000 $ 0
Senior Vice President, 1995 $ 164,420 $ 67,042 26,666 $ 0
Finance and Administration
and Secretary
Leon Malmed 1997 $ 210,781 $ 60,636 25,000 $ 0
Senior Vice President 1996 $ 195,903 $ 50,602 30,000 $ 0
Marketing and Sales 1995 $ 187,010 $ 110,737 26,666 $ 0
Daniel Auclair 1997 $ 197,760 $ 54,876 0 $ 0
Senior Vice President 1996 $ 186,464 $ 45,324 30,000 $ 0
Business Development & 1995 $ 177,174 $ 65,292 43,332 $ 0
Intellectual Property
Marianne Jackson 1997 $ 146,967 $ 27,363 12,000 $ 0
Vice President Human 1996 $ 138,955 $ 20,218 15,000 $ 0
Resources 1995 $ 92,432 $ 32,996 49,999 $ 0
<FN>
- -----------------
(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.
</FN>
</TABLE>
10
<PAGE>
Stock Options
The following table contains information concerning the stock option
grants made to each of the Named Executive Officers for fiscal 1997. Except for
the limited stock appreciation rights described in footnote (1) below, no stock
appreciation rights were granted to those individuals during such year.
<TABLE>
Individual Grants(1)
Number of Potential Realizable
Securities Value at Assumed
Underlying % of Total Annual Rates of Stock
Options Options Granted Exercise Price Appreciation
Granted to Employees in Price Expiration For Option Term(4)
Name (#) Fiscal Year(2) ($/Sh)(3) Date 5%($) 10%($)
- ----------------- ------- --------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Dr. Eli Harari 100,000 11.26% $19.75 12/16/07 $1,241,637 $3,146,304
Cindy Burgdorf 25,000 2.81% 19.75 12/16/07 310,409 786,575
Leon Malmed 25,000 2.81% 19.75 12/16/07 310,409 786,575
Marianne Jackson 12,000 1.35% 19.75 12/16/07 148,996 377,556
<FN>
(1) Each option will become exercisable for 25% of the option shares upon the
optionee's completion of one year of service measured from December 16,
1997, the vesting commencement date, and the option will become exercisable
for the remaining shares in a series of successive equal quarterly
installments upon the optionee's completion of each additional three
(3)-month period of service with the Company over the 36-month period
beginning December 16, 1998 and ending December 15, 2001. The 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 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
25% 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.
(2) The Company granted options to purchase 888,300 shares of Common Stock to
employees during 1997.
(3) The exercise price may be paid in cash or in shares of the Company's Common
Stock valued at fair market value on the exercise date. The Company may
finance the option exercise by loaning the optionee sufficient funds to pay
the exercise price for the purchased shares, together with any federal and
state income tax liability incurred by the optionee in connection with such
exercise.
(4) 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.
</FN>
</TABLE>
11
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth information concerning option exercises
and option holdings for the 1997 fiscal year by each of the Named Executive
Officers. Except for the limited stock appreciation rights described in footnote
(1) to the Stock Options table above, no stock appreciation rights were
exercised during such year or were outstanding at the end of that year.
<TABLE>
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money Options at
Options at FY-End (#) FY-End $(1)
- ----------------------- --------------- ---------------- ------------- -------------- ------------- -------------
Name Shares Aggregate Exercis-able Unexer-cisable Exercis-able Unexer-cisable
Acquired on Value
Exercise (#) Realized($)
- ----------------------- --------------- ---------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eli Harari 0 0 152,082(2) 156,250 1,979,018 362,109
Cindy Burgdorf 0 0 167,499(3) 47,500 2,668,268 144,844
Leon Malmed 70,000 1,731,781 152,899(4) 47,500 2,504,555 144,844
Daniel Auclair 25,000 578,125 135,831(5) 22,500 2,017,519 144,844
Marianne Jackson 2,000 19,746 51,749(6) 23,250 741,126 72,422
- ----------------------- --------------- ---------------- ------------- -------------- ------------- -------------
<FN>
(1) Based on the fair market value of the Company's Common Stock at
December 26, 1997, $18.4375 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) Includes 99,999 shares that are unvested and subject to repurchase by
the Company.
(3) Includes 62,499 shares that are unvested and subject to repurchase by
the Company.
(4) Includes 35,695 shares that are unvested and subject to repurchase by
the Company.
(5) Includes 63,332 shares that are unvested and subject to repurchase by
the Company.
(6) Includes 27,083 shares that are unvested and subject to repurchase by
the Company.
</FN>
</TABLE>
12
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is
responsible for establishing the base salary and incentive cash bonus programs
for the Company's executive officers and other key employees and administering
certain other compensation programs for such individuals, subject in each
instance to review by the full Board. The Compensation Committee also has the
exclusive responsibility for the administration of the Company's 1995 Stock
Option Plan under which grants may be made to executive officers and other key
employees. The Compensation Committee is comprised of two non-employee Board
members, William V. Campbell and Alan F. Shugart.
GENERAL COMPENSATION POLICY. The overall policy of the Compensation
Committee is to provide the Company's executive officers and other key employees
with competitive compensation opportunities based upon their contribution to the
financial success of the Company and their personal performance. It is the
Compensation Committee's objective to have a substantial portion of each
officer's compensation contingent upon the Company's performance as well as upon
the officer's own level of performance. Accordingly, the compensation package
for each executive officer and key employee is comprised of three elements: (i)
base salary which reflects individual performance and is designed primarily to
be competitive with salary levels in effect at companies within and outside the
industry with which the Company competes for executive talent, (ii) annual
variable performance awards payable in cash and tied to the Company's
achievement of financial and individual performance targets, and (iii) long-term
stock-based incentive awards which strengthen the mutuality of interests between
the executive officers and the Company's stockholders. As an executive officer's
level of responsibility increases, it is the intent of the Compensation
Committee to have a greater portion of the executive officer's total
compensation be dependent upon Company performance and stock price appreciation
rather than base salary.
Factors. The principal factors which the Compensation Committee
considered in establishing the components of each executive officer's
compensation package for the 1997 fiscal year are summarized below. The
Compensation Committee may, however, in its discretion apply entirely different
factors, particularly different measures of financial performance, in setting
executive compensation for future fiscal years.
* Base Salary. For comparative compensation purposes for the 1997
fiscal year, the Compensation Committee selected a peer group of companies
within the industry which are comparable in size and growth pattern with the
Company and which compete with the Company for executive talent. The base salary
for each officer was then determined on the basis of the following factors: the
salary levels in effect for comparable positions at the peer group companies
(determined on the basis of their published 1996 fiscal year data), the
experience and personal performance of the officer and internal comparability
considerations. The weight given to each of these factors differed from
individual to individual, as the Compensation Committee deemed appropriate. The
compensation level for the Company's executive officers for the 1997 fiscal year
ranged from the 50th percentile to the 75th percentile of the base salary levels
in effect for executive officers with comparable positions at the peer group
companies, based on the published 1996 fiscal year data for those companies.
In selecting companies to survey for such compensation purposes, the
Compensation Committee considered many factors not directly associated with
stock price performance, such as geographic location, development stage,
organizational structure and market capitalization. For this reason, there is
not a meaningful correlation between the companies included within the peer
group identified for comparative compensation purposes and the companies
included within the S&P Electronics Semiconductor Index which the Company has
selected as the industry index for purposes of the stock performance graph
appearing later in this Proxy Statement.
* Annual Incentive Compensation. Annual bonuses are earned by each
executive officer on the basis of the Company's achievement of certain corporate
financial performance targets established for the fiscal year and the
individual's level of performance. For fiscal year 1997, a minimum of 75% of the
bonus was earned on the basis of Company performance and the remaining 25% on
the basis of individual performance. Company performance was measured on the
basis of pre-tax profit (exclusive of royalties) and net revenue targets
established by the Compensation
13
<PAGE>
Committee at the start of the 1997 fiscal year. These targets were met for the
year. Accordingly, the executive officers were awarded the bonuses indicated for
them in the Summary Compensation Table which appears earlier in this proxy
statement.
* Long-Term Incentive Compensation. Long-term incentives are provided
through stock option grants. The grants are designed to align the interests of
each executive officer with those of the stockholders and provide each
individual with a significant incentive to manage the Company from the
perspective of an owner with an equity stake in the business. Each grant allows
the individual to acquire shares of the Company's common stock at a fixed price
per share (the market price on the grant date) over a specified period of time
(up to 10 years). Each option generally becomes exercisable in installments over
the executive officer's continued employment with the Company. Accordingly, the
option will provide a return to the executive officer only if the executive
officer remains employed by the Company during the applicable vesting period,
and then only if the market price of the underlying shares appreciates over the
option term.
The number of shares subject to each option grant is set at a level
intended to create a meaningful opportunity for stock ownership based on the
officer's current position with the Company, the size of comparable awards made
to individuals in similar positions within the industry, the individual's
potential for increased responsibility and promotion over the option term, and
the individual's personal performance in recent periods. The Compensation
Committee also takes into account the number of unvested options held by the
executive officer in order to maintain an appropriate level of equity incentive
for that individual. However, the Compensation Committee does not adhere to any
specific guidelines as to the relative option holdings of the Company's
executive officers.
CEO COMPENSATION. In setting Dr. Harari's base salary as Chief
Executive Officer for the 1997 fiscal year, the Compensation Committee sought to
achieve two objectives: (i) establish a level of base salary competitive with
that paid to other chief executive officers of the peer group companies and (ii)
make a significant percentage of the total compensation package contingent upon
Company performance. The base salary established for Dr. Harari on the basis of
the foregoing criteria was intended to provide him with a level of stability and
certainty each year. Accordingly, this element of Dr. Harari's compensation was
not affected to any significant degree by Company performance factors and was at
the 50th percentile of the base salary levels in effect for other chief
executive officers at the same peer group of companies surveyed for comparative
compensation purposes. The remaining components of the compensation earned by
Dr. Harari for the 1997 fiscal year were entirely dependent upon financial
performance and provided no dollar guarantees. The cash bonus paid to Dr. Harari
for the 1997 fiscal year was based primarily on the Company's achievement of the
operating profit targets established for that year and the Compensation
Committee's assessment of his individual performance for the year. A stock
option for an additional 100,000 shares of Common Stock was granted to Dr.
Harari on December 16, 1997 in order to bring his level of unvested stock option
holdings to a level the Compensation Committee deemed appropriate to provide him
with a meaningful incentive to remain in the Company's employ and contribute to
the financial success of the Company in the form of stock price appreciation.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). Section 162(m) of
the Internal Revenue Code, enacted in 1993, generally disallows a tax deduction
to publicly-held companies for compensation paid to certain executive officers,
to the extent that compensation exceeds $1 million per officer in any year. The
compensation paid to the Company's executive officers for the 1997 fiscal year
did not exceed the $1 million limit per officer, and it is not expected the
compensation to be paid to the Company's executive officers for the 1998 fiscal
year will exceed that limit. In addition, the Company's 1995 Stock Option Plan
is structured so that any compensation deemed paid to an executive officer in
connection with the exercise of his or her outstanding options under the 1995
Plan with an exercise price per share equal to the fair market value per share
of the Common Stock on the grant date will qualify as performance-based
compensation which will not be subject to the $1 million limitation. Because it
is very unlikely that the cash compensation payable to any of the Company's
executive officers in the foreseeable future will approach the $1 million limit,
the Compensation Committee has decided at this time not to take any other action
to limit or restructure the elements of cash compensation payable to the
Company's executive officers. The Compensation Committee will reconsider this
decision should the individual compensation of any executive officer ever
approach the $1 million level.
14
<PAGE>
William V. Campbell, Compensation Committee Member
Alan F. Shugart, Compensation Committee Member
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors was
formed in June 1990 and is comprised of Messrs. William V. Campbell and Alan F.
Shugart. Neither of these individuals was at any time during fiscal 1997, or at
any other time, an officer or employee of the Company. No executive officer of
the Company serves as a member of the board of directors or compensation
committee of any other entity that has one or more executive officers serving as
a member of the Company's Board of Directors or Compensation Committee.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL AGREEMENTS
None of the Company's executive officers have employment agreements
with the Company, and their employment may be terminated at any time at the
discretion of the Board of Directors. Pursuant to the express provisions of the
1995 Stock Option Plan, the outstanding options under the 1995 Plan held by the
Chief Executive Officer and the Company's other executive officers will
immediately accelerate in full, and all unvested shares of Common Stock at the
time held by such individuals under the 1995 Plan will immediately vest, in the
event their employment were to be terminated (whether involuntarily or through a
forced resignation) within twelve (12) months after any acquisition of the
Company by merger or asset sale in which those options and shares did not
otherwise vest. In addition, the Compensation Committee of the Board of
Directors has the authority as Plan Administrator of the 1995 Stock Option Plan
to provide for the accelerated vesting of the outstanding options under the 1995
Plan held by the Chief Executive Officer and the Company's other executive
officers and the immediate vesting of all unvested shares of Common Stock at the
time held by such individuals under the 1995 Plan, in the event their employment
were to be terminated (whether involuntarily or through a forced resignation)
following a successful tender offer for more than fifty percent (50%) of the
Company's outstanding Common Stock or a change in the majority of the Board as a
result of one or more contested elections for Board membership.
15
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on
the Common Stock of the Company with that of the Standard & Poors 500 Stock
Index, a broad market index published by S&P, and a selected S&P
Electronics/Semiconductor company stock index compiled by Morgan Stanley &
Company. The comparison for each of the periods assumes that $100 was invested
on November 7, 1995 (the date of the Company's initial public offering) in the
Company's Common Stock, the stocks included in the S&P 500 Stock Index and the
stocks included in the S&P Electronics/Semiconductor company index. These
indices, which reflect formulas for dividend reinvestment and weighing of
individual stocks, do not necessarily reflect returns that could be achieved by
individual investors.
COMPARISON OF CUMULATIVE TOTAL RETURN FROM
NOVEMBER 7, 1995 TO DECEMBER 26, 1997.
AMONG SANDISK, S&P 500 STOCK INDEX AND
S&P ELECTRONICS SEMICONDUCTOR COMPANY INDEX
SanDisk S&P Electronics
Date Corporation Semiconductor Index S&P 500
--------- ----------- ------------------- -------
(% Index)
07-Nov-95 100.00 100.00 100.00
12-Jan-96 152.50 76.67 103.12
18-Mar-96 137.50 83.08 112.31
21-May-96 157.50 93.63 116.22
25-Jul-96 110.00 84.59 109.41
27-Sep-96 160.00 115.14 119.51
02-Dec-96 136.25 149.71 132.22
05-Feb-97 127.50 178.90 136.45
11-Apr-97 110.00 159.99 129.82
16-Jun-97 133.13 176.83 157.89
19-Aug-97 213.75 231.60 164.01
22-Oct-97 293.75 199.37 172.00
26-Dec-97 184.38 162.28 166.82
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933 or the Exchange Act
that might incorporate future filings, including this Proxy Statement, in whole
or in part, the preceding Compensation Committee Report on Executive
Compensation and the preceding Performance Graph shall not be incorporated by
reference into any such filings; nor shall such Report or graph be incorporated
by reference into any future filings.
16
<PAGE>
CERTAIN TRANSACTIONS
The Company has a strategic relationship with Seagate Technology, Inc.
("Seagate"), which owns 23.5% of the Company's Common Stock as calculated on a
fully diluted basis. In January 1993, Seagate acquired a 25% ownership interest
in the Company and entered into a joint cooperation agreement that provides for
a strategic alliance between the parties. Seagate has the option to market the
Company's products commencing in January, 1999 and at that time may be
established as a distributor for the Company's products. If the option is
exercised, the Company and Seagate will coordinate their efforts so that up to
one-third of the Company's worldwide net revenues from all flash products could
be generated from sales of the Company's flash products through Seagate. The
joint cooperation agreement also provides that each party will have the
exclusive right to market to certain customers. The joint cooperation agreement
will terminate if, among other things, Seagate's ownership interest in the
Company falls below 10% or, on or after January 15, 2000, upon at least one
year's advance written notice by the Company to Seagate. Seagate has the right
to nominate one director to the Company's Board of Directors. Alan F. Shugart,
Seagate's Chairman and Chief Executive Officer, serves as Seagate's nominee to
the Company's Board of Directors. The Shareholder Rights Plan, adopted by the
Board of Directors on April 21, 1997, permits Seagate to continue to hold its
ownership interest in the Company without triggering the provisions of the plan.
The Company believes that all of the transactions set forth above were
made on terms no less favorable to the Company than could have been obtained
from unaffiliated third parties. The Company intends that all future
transactions, including loans, between the Company and its officers, directors,
principal stockholders and their affiliates be approved by a majority of the
Board of Directors, including a majority of the independent and disinterested
outside directors on the Board of Directors, and be on terms no less favorable
to the Company than could be obtained from unaffiliated third parties. In
addition, the Company has entered into indemnification agreements with each of
its directors and executive officers.
17
<PAGE>
OTHER BUSINESS
The Board of Directors knows of no other business that will be
presented for consideration at the Annual Meeting. If other matters are properly
brought before the Annual Meeting, however, it is the intention of the persons
named in the accompanying proxy to vote the shares represented thereby on such
matters in accordance with their best judgment.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's Annual Meeting of stockholders to be held in 1999 must be received by
December 18, 1998 in order to be included in the proxy statement and proxy
relating to that meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Cindy Burgdorf
CINDY BURGDORF
Chief Financial Officer, Senior Vice President, Finance and
Administration and Secretary
March 23, 1998
