<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
</TABLE>
SANDISK CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
N/A
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
N/A
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
-------------------------------------------------------------------------
(5) Total fee paid:
N/A
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
N/A
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
N/A
-------------------------------------------------------------------------
(3) Filing Party:
N/A
-------------------------------------------------------------------------
(4) Date Filed:
N/A
-------------------------------------------------------------------------
SANDISK CORPORATION
<PAGE>
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
May 11, 2000 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 six (6) directors of the Company, (ii) to
approve an amendment to the Company's Certificate of Incorporation to increase
the authorized shares of the Company's common stock (the "Common Stock" from
125,000,000 shares to 400,000,000 shares and (iii) to ratify the appointment of
Ernst & Young LLP as independent accountants of the Company for the fiscal year
ending December 31, 2000.
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 May 11, 2000. 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 1999 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
April ___, 2000
- --------------------------------------------------------------------------------
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 MAY 11, 2000
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 May 11, 2000 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 and
Alan F. Shugart.
2. To approve an amendment to the Company's Certificate of Incorporation to
increase the authorized shares of the Company's common stock (the "Common
Stock") from 125,000,000 shares to 400,000,000 shares.
3. To ratify the appointment of Ernst & Young LLP as independent accountants
of the Company for the fiscal year ending December 31, 2000.
4. 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 15, 2000 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/ Eli Harari
Eli Harari
President and Chief Executive Officer
Sunnyvale, California
April __, 2000
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 MAY 11, 2000
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 May 11, 2000, 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 15, 2000 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 April 6, 2000.
All references to shares of Common Stock in this Proxy Statement are
adjusted to account for the Company's 2-for-1 stock split, effected as a 100%
stock dividend, in February 2000.
VOTING RIGHTS
The close of business on March 15, 2000 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
66,531,812 shares of its Common Stock outstanding and entitled to vote at the
Annual Meeting, held by approximately 203 stockholders of record. 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 (six 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
six 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, 2, and 3 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 voting is required for the election of directors. An affirmative
vote of a majority of the shares of the Company's outstanding Common Stock is
required to amend the Company's Certificate of Incorporation to increase the
authorized number of shares of Common Stock. An affirmative vote of a majority
of the shares present or represented at the meeting and entitled to vote is
required for ratification 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 Proposal 3
presented to the stockholders has been approved, but will have the effect of
negative votes for purposes of Proposal 2.
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. In addition, the Company may engage
and pay a proxy solicitation firm to aid in the solicitation of proxies. 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 January 2, 2000,
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
<PAGE>
___________________________________
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
___________________________________
At the Annual Meeting, six 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 six nominees named below for election to the Company's Board of
Directors unless authority to vote for any such nominee is withheld. There are
six 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 six 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 six nominees.
NOMINEES
Set forth below is information regarding the nominees to the Board of
Directors.
<TABLE>
<CAPTION>
Name Position(s) with the Company Age First Elected Director
---- ---------------------------- --- ----------------------
<S> <C> <C> <C>
Dr. Eli Harari................. President, Chief Executive Officer 54 1988
and Director
Irwin Federman(1).............. Chairman of the Board 64 1988
William V. Campbell(2)......... Director 59 1993
Catherine P. Lego(1)(2)........ Director 43 1989
Dr. James D. Meindl............ Director 66 1989
Alan F. Shugart(2)............. Director 69 1993
</TABLE>
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
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.
3
<PAGE>
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 Advanced Micro Devices,
which acquired Monolithic Memories; a corporation engaged in the production of
integrated circuits, with which he was affiliated for over 17 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, Check Point Software Technologies, Inc.,
MMC Networks, Inc., Quicklogic, Inc., Netro Corporation and various private
corporations. Mr. Federman holds a B.S. degree in Economics from Brooklyn
College.
Mr. Campbell has served as a director of the Company since October 1993.
Mr. Campbell is Chairman of the Board of Directors of Intuit and currently
acting chief executive for the company. From 1994 to 1998, Mr. Campbell served
as the President and Chief Executive Officer and a director of Intuit. 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 also serves as a
director for Apple Computer and Great Plains Software. 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.
Currently, she is the general partner of The Photonics Fund, a venture capital
firm focused on the fiber optic industry. Ms. Lego had been previously self-
employed with her consulting firm, Lego Ventures, from 1992 to December 1999.
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 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. Shugart has served as a director of the Company since January 1993.
Mr. Shugart founded Seagate Technology, Inc. in 1979, building the company into
the world's largest independent manufacturer of disk drives and related
components. In 1998, he left Seagate to establish Al Shugart International, a
management/consultant company focused on helping entrepreneurs launch new
enterprises. Mr. Shugart also serves as a director of Cypress Semiconductor
Corp., Valence Technology, Inktomi, and Sarnoff Digital Communications. Mr.
Shugart holds a B.S. degree in Engineering/Physics from the University of
Redlands.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held eight meetings during fiscal 1999. Each
member of the Board of Directors during fiscal 1999 attended or participated
in seventy five percent (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 Irwin Federman (who attended fifty-eight
percent (58%) 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 four meetings during
fiscal 1999. The Audit Committee, which is currently comprised of Directors
Federman and Lego, recommends engagement of the
4
<PAGE>
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 two meetings
during fiscal 1999 and approved grants of options by written consent on a
monthly basis. The Compensation Committee, which is comprised of Directors
Campbell, Lego 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 .
The Special Option Committee of the Board of Directors was established in
October 1999 and delegated the authority to make option grants other than
Officers and Board members of the Company as long as such grants are less than
two times the Company's then-current option guidelines. The Special Option
Committee is comprised of one Board member, Mr. Harari, and granted options on a
weekly basis following its establishment in October 1999.
DIRECTOR COMPENSATION
Board members receive cash compensation for their services as a director
based on their attendance of board and committee meetings. Board members are
compensated for their service at Board Meetings at the rate of $1,500 for in-
person meetings and $500 for telephonic meetings. Board members are compensated
for their service on Board committees at the rate of $500 for in-person meetings
and $250 for telephonic meetings. The non-employee Board members are also
eligible to receive periodic option grants under the Company's 1995 Non-Employee
Directors Stock Option Plan (the "Directors Plan").
Each individual who was re-elected as a non-employee Board member at the
1999 Annual Meeting received at that time an option grant under the Directors
Plan to purchase 16,000 shares of Common Stock, provided such individual had
served as a non-employee Board member for at least six months. Accordingly,
each of the following non-employee Board members re-elected to the Board at the
1999 Annual Meeting received an option grant for 16,000 shares on May 12, 1999,
the date of that meeting, at an exercise price of $15.2188 per share: Messrs.
Federman, Campbell, Meindl, and Shugart and Ms. Lego. In addition, Mr. Thomas F.
Mulvaney received an automatic option grant, which grant terminated upon his
resignation as a director in August 1999.
Each automatic grant has an exercise price per share equal to the fair
market value per share of Common Stock on the grant date and has a maximum term
of 10 years, subject to earlier termination following the optionee's cessation
of Board service. Each automatic option is 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 16,000-share grant made to each non-
employee Board member re-elected at the 1999 Annual Meeting 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
<PAGE>
______________________________________________
PROPOSAL NO. 2
INCREASE OF NUMBER OF SHARES OF AUTHORIZED COMMON STOCK
______________________________________________
The Company is asking the stockholders to approve an amendment to the
Company's Certificate of Incorporation to increase the authorized shares of the
Company's common stock (the "Common Stock") from 125,000,000 shares to
400,000,000 shares. The Board of Directors of the Company believes the increase
in the authorized shares is necessary to provide the Company with the
flexibility to act in the future with respect to financing programs,
acquisitions and other corporate purposes, including effecting potential stock
splits, without the delay and expense of obtaining stockholder approval each
time an opportunity requiring the issuance of shares may arise.
On March 15, 2000, the Company had approximately 66,531,812 shares of
Common Stock issued and outstanding. Also on that date, the Company had
8,252,944 shares of Common Stock subject to outstanding options under the
Company's 1995 Stock Option Plan and the Company's 1995 Non-Employee Directors
Stock Option Plan, including options incorporated from the predecessor plans,
6,190,659 shares available for future grant under such plans and 1,359,396
shares available for issuance under the Company's Employee Stock Purchase Plan.
A substantial majority of the Company's 125 million authorized shares have been
issued or are reserved for issuance and thus few shares are available to the
Company for use in connection with its future financing and other corporate
needs. The lack of authorized Common Stock available for issuance could
unnecessarily limit the Company's ability to pursue opportunities for future
financings, acquisitions, mergers and other transactions. The Company would also
be limited in its ability to effectuate future stock splits or stock dividends.
The Company has considered other plans to issue additional shares of Common
Stock in possible future financings. The Board of Directors believes that the
increase in the authorized shares of Common Stock is necessary to provide the
Company with the flexibility to pursue the types of opportunities described
above without added delay and expense, including the facilitation of the
Company's ability to effect stock splits and thereby provide the opportunity to
broaden the stockholder base.
The availability of authorized but unissued shares of Common Stock might be
deemed to have the effect of preventing or discouraging an attempt by another
person to obtain control of the Company, because the additional shares could be
issued by the Board of Directors, which could dilute the stock ownership of such
person. The Company has no plans for such issuances and this proposal is not
being proposed in response to a known effort to acquire control of the Company.
In addition, an issuance of additional shares by the Company could have an
effect on the potential realizable value of a stockholder's investment. In the
absence of a proportionate increase in the Company's earnings and book value, an
increase in the aggregate number of outstanding shares of the Company caused by
the issuance of the additional shares would dilute the earnings per share and
book value per share of all outstanding shares of the Company's capital stock.
If such factors were reflected in the price per share of Common Stock, the
potential realizable value of a stockholder's investment could be adversely
affected.
The additional shares of Common Stock to be authorized by adoption of the
amendment to the Certificate of Incorporation would have rights identical to the
currently outstanding shares of Common Stock of the Company. Adoption of the
proposed amendment to the Certificate of Incorporation would not affect the
rights of the holders of currently outstanding shares of Common Stock.
Adoption of the amendment to the Certificate of Incorporation to increase
the Company's authorized Common Stock requires the vote of a majority of the
outstanding shares of the Company's Common Stock. Votes, abstentions and broker
non-votes will be counted as set forth above in "VOTING PROCEDURES." If the
proposal is approved, the Company intends to file an amendment to its
Certificate of Incorporation promptly after the Meeting. The amendment to the
Certificate of Incorporation will be effective immediately upon acceptance of
filing
6
<PAGE>
by the Secretary of State of the State of Delaware. Thereafter, the Board of
Directors would generally be free to issue Common Stock without further action
on the part of the stockholders.
The Board of Directors recommends that the stockholders vote FOR the
adoption of the proposed increase in the number of shares of authorized Common
Stock.
7
<PAGE>
______________________________________________
PROPOSAL NO. 3
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 31, 2000. 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 31, 2000.
8
<PAGE>
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 15, 2000 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 (as determined at the fiscal year
ended January 2, 2000), and (iv) all current executive officers and directors of
the Company as a group.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership(1)
-----------------------
Name or Group of Beneficial Owners Number of Shares Percent Owned(2)
- ---------------------------------- ---------------- ----------------
<S> <C> <C>
Seagate Technology, Inc................................ 4,082,748 6.14 %
Scotts Valley, CA
FMR Corp. (3).......................................... 5,092,380 7.66
Boston, MA
Forstmann-Leff Associates, Inc. (3) 4,361,062 6.56
New York, NY
American Century Investment Management, Inc. (3)....... 3,550,000 5.34
Kansas City, MO
William V. Campbell(4)................................. 99,216 *
Irwin Federman(5)...................................... 63,640 *
Catherine P. Lego(6)................................... 152,074 *
Dr. Eli Harari(7)...................................... 2,503,218 3.77
Dr. James D. Meindl(8)................................. 142,930 *
Alan F. Shugart(9)..................................... 40,000 *
Daniel Auclair(10)..................................... 193,459 *
Cindy Burgdorf(11)..................................... 370,811 *
Leon Malmed(12)........................................ 118,477 *
Ralph Hudson(13)....................................... 43,361 *
All directors and executive officers as a group
(13 persons)(14)....................................... 3,943,119 5.93 %
</TABLE>
- ---------
* 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 15, 2000, including, but not
limited to, upon the exercise of an option.
(2) Percentage of beneficial ownership is based upon 66,531,812 shares of
Common Stock, all of which were outstanding on March 15, 2000. 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 15,
9
<PAGE>
2000, 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 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 ("SEC") during 1999 and 2000, the table above
includes all greater than 5% stockholders.
(3) Based on a Schedule 13G filed with the SEC in February 2000.
(4) Includes 40,000 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. Also
includes 268 shares owned by BHMS III, of which Mr. Federman is a general
partner and disclaims beneficial ownership in the shares except with
respect to the pecuniary interest arising from his interest in BHMS III.
(6) Includes 40,000 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 2,058,794 shares held in the name of a trust for the benefit of
Dr. Harari and his wife. Also includes 395,024 shares owned by Dr. Harari
in the form of outstanding options, which were exercisable on March 15,
2000, or within 60 days of that date. Also includes 22,666 shares owned
directly by his son and 22,986 shares held in the name of a trust for the
benefit of his children.
(8) Represents 110,930 shares held as community property in the name of Dr.
Meindl and his wife. Also includes 32,000 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 40,000 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.
(10) Includes 65,161 shares owned by Mr. Auclair in the form of outstanding
options, which were exercisable on March 15, 2000 or within 60 days of that
date. Includes an aggregate of 9,510 shares owned by his children held in
his name as custodian.
(11) Includes 50,653 shares owned by Ms. Burgdorf in the form of outstanding
options, which were exercisable on March 15, 2000 or within 60 days of that
date.
(12) Includes 15,001 shares owned by Mr. Malmed in the form of outstanding
options, which were exercisable on March 15, 2000 or within 60 days of that
date.
(13) Includes 43,361 shares owned by Mr. Hudson in the form of outstanding
options, which were exercisable on March 15, 2000 or within 60 days of that
date.
(14) Includes 894,689 shares subject to options, including those identified in
notes (4), (5), (6), (7), (8), (9), (10), (11), (12) and (13).
10
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, 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 stockholders holding more
than ten percent (10%) of the outstanding capital stock of the Company 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 1999 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 1999 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 27, 2000. Stockholders may obtain a copy
of this report, without charge, by writing to Frank Calderoni, Chief Financial
Officer and Senior Vice President, Finance and Administration of the Company, at
the Company's principal executive offices located at 140 Caspian Court,
Sunnyvale, California 94089.
11
<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 salary and bonus for the 1999 fiscal year was in excess of $100,000, for
services rendered in all capacities to the Company and its subsidiaries for each
of the last three fiscal years. Such individuals will be hereafter referred to
as the Named Executive Officers. No other executive officer who would have
otherwise been includible in such table on the basis of salary and bonus earned
for the 1999 fiscal year has resigned or terminated employment during that
fiscal year.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation All Other
Annual Compensation Awards Compensation
----------------------------------- ------------ ------------
Securities
Name and Principal Underlying
Position Years Salary($)/(1)/ Bonus($)/(2)/ Options(#)/
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dr. Eli Harari 1999 $368,473 $329,901 200,000 $0
President and Chief 1998 $303,529 $ 0 200,000 $0
Executive Officer 1997 $273,384 $208,920 200,000 $0
Cindy Burgdorf/(3)/ 1999 $220,610 $ 98,537 0 $0
Chief Financial Officer, 1998 $196,501 $ 0 100,000 $0
Senior Vice President, 1997 $189,212 $ 69,309 50,000 $0
Finance and Administration
and Secretary
Leon Malmed 1999 $230,974 $104,881 0 $0
Senior Vice President 1998 $215,938 $ 0 100,000 $0
Marketing and Sales 1997 $210,781 $ 76,047 50,000 $0
Daniel Auclair 1999 $215,242 $ 96,141 30,000 $0
Senior Vice President 1998 $202,590 $ 0 30,000 $0
Business Development & 1997 $197,760 $ 58,677 0 $0
Intellectual Property
Ralph Hudson 1999 $232,926 $103,528 50,000 $0
Senior Vice President 1998 $ 76,933 $105,772(4) 220,000 $0
Operations
</TABLE>
____________________
(1) Includes salary deferral contributions to the Company's 401(k) Plan.
(2) Bonus earned for the year indicated but paid in the following year.
(3) Ms. Burgdorf resigned from the position of CFO effective February 29,
2000 and has announced her intention to retire in June 2000.
(4) Mr. Hudson joined the Company on August 17, 1998 and was paid a one-time
hiring bonus in 1998.
12
<PAGE>
Stock Options
The following table contains information concerning the stock option grants
made to each of the Named Executive Officers for fiscal 1999. Except for the
limited stock appreciation rights described in footnote (1) below, no stock
appreciation rights were granted to those individuals during such year.
Individual Grants/
------------------
<TABLE>
<CAPTION>
Number of Potential Realizable
Securities Value at Assumed
Underlying % of Total Annual Rates of Stock
Options Options Granted Exercise Price Appreciation
Granted to Employees in Price Expiration For Option Term(5)
------------------
Name (#)/(2)/ Fiscal Year/(3)/ ($/Sh)/(4)/ Date 5%($) $10%($)
---- --------- --------------- ----------- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
Dr. Eli Harari 200,000 6.89% $35.8125 12/13/09 $ 4,502,898 $11,410,330
Cindy Burgdorf 0 0%
Leon Malmed 0 0%
Daniel Auclair 30,000 1.03% 35.8125 12/13/09 675,435 1,711,549
Ralph Hudson 50,000 1.72% 35.8125 12/13/09 1,125,725 2.852,582
</TABLE>
(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 14,
1999, 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 14, 2000 and ending December 13, 2003.
(2) Each option will become immediately exercisable for all the option shares
upon an acquisition of the Company by merger or asset sale, unless the
option is assumed 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.
(3) The Company granted options to purchase 2,903,632 shares of Common Stock to
employees during 1999.
(4) 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 and employment withholding taxes to which the optionee may be
subject in connection with such exercise.
(5) Potential gains are net of exercise price, but before taxes associated with
exercise. There is no assurance that the actual stock price appreciation
over the 10-year option term will be at the assumed 5% and 10% levels of
assumed annual rates of compounded stock price appreciation or at any other
defined level. Unless the market price of the Common Stock appreciates over
the option term, no value will be realized from the option grants made to
the executive officers.
13
<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 1999 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>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Number of Securities Underlying Value of Unexercised in-the-Money
Unexercised Options at FY-End (#) Options at FY-End $/(1)/
- --------------------------------------------------------------------------------------------------------------------------------
Name Shares Aggregate
Acquired on Value Exercisable Unexercisable Exercisable Unexercisable
Exercise (#) Realized($)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Eli Harari 0 0 529,164 487,500 22,891,024 14,148,438
Cindy Burgdorf 157,034 3,510,507 257,964 115,000 11,988,212 4,728,750
Leon Malmed 114,790 2,459,590 41,876 115,000 1,771,913 4,728,750
Daniel Auclair 34,000 1,054,000 171,830 67,500 7,623,204 1,943,438
Ralph Hudson 0 0 67,500 202,500 2,963,281 7,302,344
==============================================================================================================================
</TABLE>
(1) Based on the fair market value of the Company's Common Stock at January 2,
2000, $48.125 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.
14
<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 three non-employee Board members,
William V. Campbell, Alan F. Shugart and Catherine P. Lego.
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 1999 fiscal year are summarized below. The Compensation Committee may,
however, at 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 1999 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 1998 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 1999 fiscal year
ranged from the 60th 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 1998 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 1999, a minimum of 75% of
the bonus target was measured on the basis of Company performance and the
remainder of the bonus target was tied to individual performance. Company
performance was measured on the basis of pre-tax profit (exclusive of royalties)
and net revenue targets established by the Compensation Committee at the start
of the 1999 fiscal year. The executive officers were
15
<PAGE>
awarded bonuses for fiscal 1999 on this basis as 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 1999 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 for all of the Company's other executive officers. The
remaining components of the compensation purposes for all of the Company's other
executive officers. The remaining components of the compensation earned by Dr.
Harari for the 1999 fiscal year were entirely dependent upon financial
performance and provided no dollar guarantees. Dr. Harari was paid a cash bonus
of $329,901 for the 1999 fiscal year based upon his individual performance and
the same Company performance factors taken into account for incentive
compensation purposes for the Company's other executive officers.
Dr. Harari also received an option grant for 200,000 shares during the
1999 fiscal year with an exercise price equal to the market price of the shares
on the grant date. The grant is designed to provide him with a significant
incentive to remain in the Company's employ and to contribute to the creation of
shareholder value in the form of stock price appreciation, since the grant will
not have any value unless Dr. Harari remains with the Company during the four-
year vesting period and the market price of the Company's common stock
appreciates over the market price in effect at the time the option grant was
made to him.
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 1999 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 2000 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.
William V. Campbell, Compensation Committee Member
Alan F. Shugart, Compensation Committee Member
Catherine P. Lego, Compensation Committee Member
16
<PAGE>
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, Alan F. Shugart
and Ms. Catherine Lego. None of these individuals was at any time during fiscal
1999, 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.
17
<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 investor.
Comparison of Cumulative Total Return From
November 7, 1995 to December 31, 1999
- --------------------------------------------------------------------------------
Among SanDisk, S&P 500 Stock Index
and S&P Electronics Semiconductors Company Index
Indexed Price
Fiscal Quarters
1995 31-Dec
1996 31-Mar
30-Jun
29-Sep
29-Dec
1997 30-Mar
29-Jun
28-Sep
28-Dec
1998 29-Mar
28-Jun
27-Sep
27-Dec
1999 28-Mar
27-Jun
26-Sep
2-Jan
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.
18
<PAGE>
CERTAIN TRANSACTIONS
The Company has a strategic relationship with Seagate Technology, Inc.
("Seagate"), which owns 5.4% 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. Thomas F. Mulvaney, Seagate's Senior Vice President,
General Counsel and Secretary, served as Seagate's nominee to the Company's
Board of Directors until he resigned in August 1999. 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 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.
19
<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 2001 must be received by
February 22, 2001 in order to be included in the proxy statement and proxy
relating to that meeting.
In addition, the proxy solicited by the Board of Directors for the Annual
Meeting to be held in 2001 will confer discretionary authority to vote on any
stockholder proposal presented at that meeting, unless the Company is provided
with notice of such proposal no later than February 22, 2001.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Eli Harari
Eli Harari
President and Chief Executive Officer
March 24, 2000
20
