-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NiyVpThxEJ81krYkY8sDworMKapmXTCmOcttT3njEnvUwPrkOkYZGmgPMWWpQDY3 2ScTja6eWlY5l3Ikkk0qeg== 0001021408-02-004663.txt : 20020415 0001021408-02-004663.hdr.sgml : 20020415 ACCESSION NUMBER: 0001021408-02-004663 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20020401 EFFECTIVENESS DATE: 20020401 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SANDISK CORP CENTRAL INDEX KEY: 0001000180 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER STORAGE DEVICES [3572] IRS NUMBER: 770191793 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: 1933 Act SEC FILE NUMBER: 333-85320 FILM NUMBER: 02598195 BUSINESS ADDRESS: STREET 1: 140 CASPIAN COURT CITY: SUNNYVALE STATE: CA ZIP: 94089 BUSINESS PHONE: 4085620500 MAIL ADDRESS: STREET 1: 140 CASPIAN COURT CITY: SUNNYVALE STATE: CA ZIP: 94089 S-8 1 ds8.txt FORM S-8 As filed with the Securities and Exchange Commission on April 1, 2002 Registration No. 333-________ ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________ FORM S-8 REGISTRATION STATEMENT Under The Securities Act of 1933 ___________ SANDISK CORPORATION (Exact name of registrant as specified in its charter) Delaware 77-0191793 (State or other jurisdiction (IRS Employer Identification No.) of incorporation or organization) 140 Caspian Court Sunnyvale, CA 94089 (Address of principal executive offices) (Zip Code) ___________ SANDISK CORPORATION 1995 STOCK OPTION PLAN, AS AMENDED AND RESTATED JANUARY 2, 2002 SANDISK CORPORATION EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED AND RESTATED JANUARY 2, 2002 SANDISK CORPORATION INTERNATIONAL EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED AND RESTATED JANUARY 2, 2002 SANDISK CORPORATION 1995 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN, AS AMENDED AND RESTATED JANUARY 2, 2002 (Full title of the Plans) ___________ Dr. Eli Harari President and Chief Executive Officer SanDisk Corporation 140 Caspian Court Sunnyvale, CA 94089 (Name and address of agent for service) (408) 542-0500 (Telephone number, including area code, of agent for service) ___________ CALCULATION OF REGISTRATION FEE
====================================================================================================================== Proposed Proposed Amount to be Maximum Offering Maximum Aggregate Amount of Title of Securities to be Registered Registered(1) Price per Share(2) Offering Price(2) Registration Fee - ------------------------------------ ------------- ------------------ ----------------- ---------------- SanDisk Corporation 1995 Stock Option Plan, as amended and restated January 2, 2002 Common Stock, $0.001 par value 2,985,040 shares $ 20.38 $ 60,835,115.20 $ 5,596.83 SanDisk Corporation Employee Stock Purchase Plan, as amended and restated January 2, 2002 Common Stock, $0.001 par value 244,396 shares $ 20.38 $ 4,980,790.48 $ 458.23 SanDisk Corporation International Employee Stock Purchase Plan, as amended and restated January 2, 2002 Common Stock, $0.001 par value 50,000 shares $ 20.38 $ 1,019,000.00 $ 93.75 SanDisk Corporation 1995 Non-Employee Directors Stock Option Plan, as amended and restated January 2, 2002 Common Stock, $0.001 par value 136,928 shares $ 20.38 $ 2,790,592.64 $ 256.74 3,416,364 shares Aggregate Registration Fee $ 6,405.55 ======================================================================================================================
(1) This Registration Statement shall also cover any additional shares of Common Stock which become issuable under the Registrant's 1995 Stock Option Plan, as amended and restated January 2, 2002, Employee Stock Purchase Plan, as amended and restated January 2, 2002, International Employee Stock Purchase Plan, as amended and restated January 2, 2002 and 1995 Non-Employee Directors Stock Option Plan, as amended and restated January 2, 2002, by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the Registrant's receipt of consideration which results in an increase in the number of the outstanding shares of Registrant's Common Stock. (2) Calculated solely for purposes of this offering under Rule 457(h) of the Securities Act of 1933, as amended, on the basis of the average of the high and low selling price per share of the Registrant's Common Stock on March 26, 2002, as reported by the Nasdaq National Market. PART II Information Required in the Registration Statement Item 3. Incorporation of Documents by Reference SanDisk Corporation (the "Registrant") hereby incorporates by reference into this Registration Statement the following documents previously filed with the Securities and Exchange Commission (the "Commission"): (a) The Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2001, filed with the Commission on March 28, 2002; (b) The Registrant's Registration Statement on Form 8-A and Form 8-A12G filed with the Commission on September 8, 1995, and April 28, 1997, respectively, pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended (the "1934 Act"), in which there is described the terms, rights and provisions applicable to the Registrant's outstanding Common Stock and the Registrant's Series A Junior Participating Preferred Stock (the "Preferred Stock") and the associated rights of certain Common Stock holders to purchase the Preferred Stock. All reports and definitive proxy or information statements filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of this Registration Statement and prior to the filing of a post-effective amendment which indicates that all securities offered hereby have been sold or which de-registers all securities then remaining unsold shall be deemed to be incorporated by reference into this Registration Statement and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein or in any subsequently filed document which also is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement. Item 4. Description of Securities With respect to securities to be offered to employees of the Registrant, the Registrant's Israeli subsidiaries, and the Registrant's Israeli branch office, SanDisk Israel Ltd., which is subject to the securities laws of the State of Israel, the following legend shall apply: "THE SECURITIES AUTHORITY OF THE STATE OF ISRAEL HAS EXEMPTED SANDISK CORPORATION", INC." FROM THE REQUIREMENT UNDER ISRAELI LAW TO OBTAIN A PERMIT WITH REGARD TO THIS FORM S-8. NOTHING IN THE EXEMPTION GRANTED SHALL BE CONSTRUED AS AUTHENTICATING THE MATTERS CONTAINED IN THIS FORM S-8 OR AN APPROVAL OF THEIR RELIABILITY OR ACCURACY OR AN EXPRESSION OF AN OPINION AS TO THE QUALITY OF THE SECURITIES OFFERED HEREBY." Item 5. Interests of Named Experts and Counsel Not Applicable. II-1 Item 6. Indemnification of Directors and Officers Section 145 of the Delaware General Corporation Law authorizes a court to award or a corporation's board of directors to grant indemnification to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933, as amended (the "1933 Act"). The Registrant's Bylaws provide for permissible indemnification of officers, employees and other agents to the maximum extent permitted by the Delaware General Corporation Law. However, the Registrant's Certificate of Incorporation (the "Certificate of Incorporation") provides that, pursuant to Delaware law, its directors shall not be liable for monetary damages for breach of their fiduciary duty as directors to the Registrant and its stockholders. However, this provision in the Certificate of Incorporation does not eliminate the fiduciary duty of the directors, and in appropriate circumstances, equitable remedies such as injunctive or other forms of non-monetary relief will remain available under Delaware law. In addition, each director will continue to be subject to liability for breach of fiduciary duty as a director for (i) any breach of the director's duty of loyalty to the Registrant or its stockholders, (ii) acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law, (iii) payment of dividends or approval of stock repurchases and redemptions that are unlawful under Delaware law and (iv) any transaction from which the director derived any improper personal benefit. The provision also does not affect a director's responsibilities under any other law, such as the federal securities laws or state or federal environmental laws. The Registrant has entered into Indemnification Agreements with its officers and directors which provide the Registrant's officers and directors with further indemnification to the maximum extent permitted by the Delaware General Corporation Law. Item 7. Exemption from Registration Claimed Not Applicable. Item 8. Exhibits Exhibit Number Exhibit - -------------- ------- 4.1 Instruments Defining the Rights of Stockholders. Reference is made to Registrant's Registration Statements on Form 8-A and Form 8-A12G, together with any exhibits thereto, which are incorporated herein by reference pursuant to Item 3(b) to this Registration Statement. 5.1 Opinion and consent of Brobeck, Phleger & Harrison LLP. 23.1 Consent of Ernst & Young LLP, Independent Auditors. 23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5. 24.1 Power of Attorney. Reference is made to page II-4 of this Registration Statement. 99.1 SanDisk Corporation 1995 Stock Option Plan, as amended and restated January 2, 2002. 99.2 SanDisk Corporation Employee Stock Purchase Plan, as amended and restated January 2, 2002. 99.3 SanDisk Corporation International Employee Stock Purchase Plan, as amended and restated January 2, 2002. 99.4 SanDisk Corporation 1995 Non-Employee Directors Stock Option Plan, as amended and restated January 2, 2002. Item 9. Undertakings A. The undersigned Registrant hereby undertakes: (1) to file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) to include any prospectus required by Section 10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement and (iii) to include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement; provided, however, that clauses (1)(i) and (1)(ii) shall not apply if the information required to be included in a post-effective amendment by those clauses is contained in periodic reports filed by the Registrant pursuant to Section 13 II-2 or Section 15(d) of the 1934 Act that are incorporated by reference into this Registration Statement; (2) that for the purpose of determining any liability under the 1933 Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the Registrant's 1995 Stock Option Plan, as amended and restated January 2, 2002, Employee Stock Purchase Plan, as amended and restated January 2, 2002, International Employee Stock Purchase Plan, as amended and restated January 2, 2002 and 1995 Non-Employee Directors Stock Option Plan, as amended and restated January 2, 2002. B. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the 1933 Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is incorporated by reference into this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. C. Insofar as indemnification for liabilities arising under the 1933 Act may be permitted to directors, officers or controlling persons of the Registrant pursuant to the indemnification provisions summarized in Item 6 or otherwise, the Registrant has been advised that, in the opinion of the Commission, such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8, and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Sunnyvale, State of California on this 1st day of April, 2002. SanDisk Corporation By: /s/ Michael Gray ----------------------------------------- Michael Gray Vice President, Finance POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned officers and directors of SanDisk Corporation, a Delaware corporation, do hereby constitute and appoint Dr. Eli Harari and Michael Gray, and each of them, the lawful attorneys-in-fact and agents with full power and authority to do any and all acts and things and to execute any and all instruments which said attorneys and agents, and any one of them, determine may be necessary or advisable or required to enable said corporation to comply with the Securities Act of 1933, as amended, and any rules or regulations or requirements of the Securities and Exchange Commission in connection with this Registration Statement. Without limiting the generality of the foregoing power and authority, the powers granted include the power and authority to sign the names of the undersigned officers and directors in the capacities indicated below to this Registration Statement, to any and all amendments, both pre-effective and post-effective, and supplements to this Registration Statement, and to any and all instruments or documents filed as part of or in conjunction with this Registration Statement or amendments or supplements thereof, and each of the undersigned hereby ratifies and confirms that all said attorneys and agents, or any one of them, shall do or cause to be done by virtue hereof. This Power of Attorney may be signed in several counterparts. IN WITNESS WHEREOF, each of the undersigned has executed this Power of Attorney as of the date indicated. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- /s/ Dr. Eli Harari President, Chief Executive Officer April 1, 2002 - ----------------------------- and Director Dr. Eli Harari (Principal Executive Officer) /s/ Michael Gray Vice President, Finance April 1, 2002 - ----------------------------- (Principal Financial and Michael Gray Accounting Officer)
II-4 /s/ Irwin Federman Chairman of the Board, Director April 1, 2002 - ----------------------------- Irwin Federman Director April 1, 2002 - ----------------------------- William V. Campbell Director April 1, 2002 - ----------------------------- Catherine P. Lego /s/ Dr. James D. Meindl Director April 1, 2002 - ----------------------------- Dr. James D. Meindl /s/ Alan F. Shugart Director April 1, 2002 - ----------------------------- Alan F. Shugart
II-5 EXHIBIT INDEX Exhibit Number Exhibit - -------------- ------- 4.1 Instruments Defining the Rights of Stockholders. Reference is made to Registrant's Registration Statements on Form 8-A and Form 8-A12G, together with any exhibits thereto, which are incorporated herein by reference pursuant to Item 3(b) to this Registration Statement. 5.1 Opinion and consent of Brobeck, Phleger & Harrison LLP. 23.1 Consent of Ernst & Young LLP, Independent Auditors. 23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5. 24.1 Power of Attorney. Reference is made to page II-4 of this Registration Statement. 99.1 SanDisk Corporation 1995 Stock Option Plan, as amended and restated January 2, 2002. 99.2 SanDisk Corporation Employee Stock Purchase Plan, as amended and restated January 2, 2002. 99.3 SanDisk Corporation International Employee Stock Purchase Plan, as amended and restated January 2, 2002. 99.4 SanDisk Corporation 1995 Non-Employee Directors Stock Option Plan, as amended and restated January 2, 2002. EX-5.1 3 dex51.txt OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON EXHIBIT 5.1 OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP April 1, 2002 SanDisk Corporation 140 Caspian Court Sunnyvale, CA 94089 Re: SanDisk Corporation - Registration Statement for Offering of an Aggregate of 3,416,364 Shares of Common Stock Dear Ladies and Gentlemen: We have acted as counsel to SanDisk Corporation, a Delaware corporation (the "Company"), in connection with the registration on Form S-8 (the "Registration Statement") under the Securities Act of 1933, as amended, of the following shares of the Company's common stock (the "Shares") (i) an additional 2,985,040 Shares issuable under Company's 1995 Stock Option Plan, as amended and restated January 2, 2002 (the "Option Plan"), (ii) an additional 244,396 Shares issuable under the Company's Employee Stock Purchase Plan, as amended and restated January 2, 2002 (the "ESPP"), (iii) 50,000 Shares issuable under the Company's International Employee Stock Purchase Plan, as amended and restated January 2, 2002 (the "IESPP") and (iii) an additional 136,928 Shares issuable under Company's 1995 Non-Employee Directors Stock Option Plan, as amended and restated January 2, 2002 (the "Directors Plan"). This opinion is being furnished in accordance with the requirements of Item 8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K. We have reviewed the Company's charter documents and the corporate proceedings taken by the Company with respect to the establishment and amendment of the Option Plan, the ESPP, the IESPP and the Directors Plan. Based on such review, we are of the opinion that, if, as and when the Shares have been issued and sold (and the consideration therefor received) pursuant to (a) the provisions of stock option agreements duly authorized under the Option Plan and in accordance with the Registration Statement, (b) duly authorized stock purchases effected in accordance with the ESPP and the Registration Statement, (c) duly authorized stock purchases effected in accordance with the IESPP and the Registration Statement or (d) the provisions of the stock option agreements duly authorized under the Directors Plan and in accordance with the Registration Statement, such Shares will be duly authorized, legally issued, fully paid and nonassessable. We consent to the filing of this opinion letter as Exhibit 5.1 to the Registration Statement. This opinion letter is rendered as of the date first written above and we disclaim any obligation to advise you of facts, circumstances, events or developments which hereafter may be brought to our attention and which may alter, affect or modify the opinion expressed herein. Our opinion is expressly limited to the matters set forth above and we render no opinion, whether by implication or otherwise, as to any other matters relating to the Company, the Option Plan, the ESPP, the IESPP, the Directors Plan or the Shares. Very truly yours, /s/ BROBECK, PHLEGER & HARRISON LLP --------------------------------------- BROBECK, PHLEGER & HARRISON LLP EX-23.1 4 dex231.txt CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.1 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8) pertaining to the 1995 Stock Option Plan, as amended and restated January 2, 2002, the Employee Stock Purchase Plan, as Amended and Restated January 2, 2002, the International Employee Stock Purchase Plan, as amended and restated January 2, 2002, and the 1995 Non-Employee Directors Stock Option Plan, as amended and restated January 2, 2002, of Sandisk Corporation, of our report dated January 21, 2002 (except for Note 3, as to which the date is March 5, 2002), with respect to the consolidated financial statements of Sandisk Corporation included in the Annual Report (Form 10-K) for the year ended December 31, 2001 filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP San Jose, California March 26, 2002 EX-99.1 5 dex991.txt SANDISK CORPORATION 1995 STOCK OPTION PLAN Exhibit 99.1 SANDISK CORPORATION 1995 STOCK OPTION PLAN AMENDED AND RESTATED JANUARY 2, 2002 ARTICLE ONE GENERAL PROVISIONS I. PURPOSE OF THE PLAN This 1995 Stock Option Plan is intended to promote the interests of SanDisk Corporation, a Delaware corporation, by providing eligible persons with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in the service of the Corporation. Capitalized terms shall have the meanings assigned to such terms in the attached Appendix. All share numbers in this January 2, 2002 restatement reflect the two-for-one split of the Common Stock effected as of February 23, 2000. II. ADMINISTRATION OF THE PLAN A. The Primary Committee shall have sole and exclusive authority to administer the Plan with respect to Section 16 Insiders. Administration of the Plan with respect to all other persons eligible to participate in those programs may, at the Board's discretion, be vested in the Primary Committee or a Secondary Committee, or the Board may retain the power to administer the Plan with respect to those persons. However, any option grants made under the Plan to members of the Primary Committee must be authorized by a disinterested majority of the Board. B. Members of the Primary Committee or any Secondary Committee shall serve for such period of time as the Board may determine and may be removed by the Board at any time. The Board may also at any time terminate the functions of any Secondary Committee and reassume all powers and authority previously delegated to such committee. C. Each Plan Administrator shall, within the scope of its administrative functions under the Plan, have full power and authority (subject to the provisions of the Plan) to establish such rules and regulations as it may deem appropriate for proper administration of the Plan and to make such determinations under, and issue such interpretations of, the provisions of the Plan and any outstanding options thereunder as it may deem necessary or advisable. Decisions of the Plan Administrator within the scope of its administrative functions under the Plan shall be final and binding on all parties who have an interest in the Plan under its jurisdiction or any stock option. D. Service on the Primary Committee or the Secondary Committee shall constitute service as a Board member, and members of each such committee shall accordingly be entitled to full indemnification and reimbursement as Board members for their service on such committee. No member of the Primary Committee or the Secondary Committee shall be liable for any act or omission made in good faith with respect to the Plan or any option grants or stock issuances under the Plan. III. ELIGIBILITY A. The persons eligible to participate in the Plan are as follows: (i) Employees, (ii) Non-employee Board members, and (iii) consultants and other independent advisors who provide services to the Corporation (or any Parent or Subsidiary). B. Each Plan Administrator shall, within the scope of its administrative jurisdiction under the Plan, have full authority to determine which eligible persons are to receive option grants, the time or times when such option grants are to be made, the number of shares to be covered by each such grant, the status of the granted option as either an Incentive Option or a Non-Statutory Option, the time or times at which each option is to become exercisable and the vesting schedule (if any) applicable to the option shares and the maximum term for which the option is to remain outstanding. IV. STOCK SUBJECT TO THE PLAN A. The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Corporation on the open market. The maximum number of shares of Common Stock which may be issued over the term of the Plan shall not exceed 21,982,462 shares. Such share reserve includes (i) the initial reserve of 6,997,422 shares, which reflects the 2:3 split of the Common Stock authorized by the Board on July 25, 1995, (ii) the additional increase of 5,000,000 shares authorized by the Board on February 10, 1997 and approved by the stockholders at the 1997 Annual Meeting (iii) an additional increase of 7,000,000 shares authorized by the Board on December 17, 1998 and approved by the stockholders at the 1999 Annual Meeting and (iv) an additional increase of 2,985,040 shares effected in January 2002 pursuant to the automatic share increase provisions of Section IV.B. The initial authorized share reserve was comprised of the number of shares which remained available for issuance, as of the Effective Date, under the Predecessor Plan as last approved by the Corporation's stockholders prior to such date, including the shares subject to the outstanding options incorporated into the Plan and any other shares which would have been available for future option grants under the Predecessor Plan. 2 B. The number of shares of Common Stock available for issuance under the Plan shall automatically increase on the first trading day of January each calendar year during the term of the Plan, beginning with calendar year 2002, by an amount equal to four and thirty-six hundreds percent (4.36%) of the shares of Common Stock outstanding on the last trading day in December of the immediately preceding calendar year, but in no event shall any such annual increase exceed 4,000,000 shares. C. No one person participating in the Plan may receive options and separately exercisable stock appreciation rights for more than 2,000,000 shares of Common Stock in the aggregate over the term of the Plan. D. Shares of Common Stock subject to outstanding options shall be available for subsequent issuance under the Plan to the extent (i) the options (including any options incorporated from the Predecessor Plan) expire or terminate for any reason prior to exercise in full or (ii) the options are cancelled in accordance with the cancellation-regrant provisions of Article Two. In addition, unvested shares issued under the Plan and subsequently repurchased by the Corporation, at the original exercise price paid per share, pursuant to the Corporation's repurchase rights under the Plan shall be added back to the number of shares of Common Stock reserved for issuance under the Plan and shall accordingly be available for reissuance through one or more subsequent option grants under the Plan. However, should the exercise price of an option under the Plan (including any option incorporated from the Predecessor Plan) be paid with shares of Common Stock or should shares of Common Stock otherwise issuable under the Plan be withheld by the Corporation in satisfaction of the withholding taxes incurred in connection with the exercise of an option under the Plan, then the number of shares of Common Stock available for issuance under the Plan shall be reduced by the gross number of shares for which the option is exercised, and not by the net number of shares of Common Stock issued to the holder of such option. E. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration, appropriate adjustments shall be made to (i) the maximum number and/or class of securities issuable under the Plan, (ii) the maximum number and/or class of securities by which the share reserve is to increase automatically each calendar year pursuant to the provisions of Section IV.B of this Article One, (iii) the number and/or class of securities for which any one person may be granted options and separately exercisable stock appreciation rights over the term of the Plan and (iv) the number and/or class of securities and the exercise price per share in effect under each outstanding option (including any option incorporated from the Predecessor Plan) in order to prevent the dilution or enlargement of benefits thereunder. The adjustments determined by the Plan Administrator shall be final, binding and conclusive. 3 ARTICLE TWO OPTION GRANT PROGRAM I. OPTION TERMS Each option shall be evidenced by one or more documents in the form approved by the Plan Administrator; provided, however, that each such document shall comply with the terms specified below. Each document evidencing an Incentive Option shall, in addition, be subject to the provisions of the Plan applicable to such options. A. Exercise Price. 1. The exercise price per share shall be fixed by the Plan Administrator but shall not be less than eighty-five percent (85%) of the Fair Market Value per share of Common Stock on the option grant date. 2. The exercise price shall become immediately due upon exercise of the option and shall, subject to the provisions of Section I of Article Three and the documents evidencing the option, be payable in one or more of the forms specified below: (i) cash or check made payable to the Corporation, (ii) shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date, or (iii) to the extent the option is exercised for vested shares, through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide irrevocable written instructions to (a) a Corporation-designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable Federal, state and local income and employment taxes required to be withheld by the Corporation by reason of such exercise and (b) the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale. Except to the extent such sale and remittance procedure is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. B. Exercise and Term of Options. Each option shall be exercisable at such time or times, during such period and for such number of shares as shall be determined by the Plan Administrator and set forth in the documents evidencing the option. However, no option shall have a term in excess of ten (10) years measured from the option grant date. 4 C. Effect of Termination of Service. 1. The following provisions shall govern the exercise of any options held by the Optionee at the time of cessation of Service or death: (i) Any option outstanding at the time of the Optionee's cessation of Service for any reason shall remain exercisable for such period of time thereafter as shall be determined by the Plan Administrator and set forth in the documents evidencing the option, but no such option shall be exercisable after the expiration of the option term. (ii) Any option held by the Optionee at the time of death and exercisable in whole or in part at that time may be subsequently exercised by the personal representative of the Optionee's estate or by the person or persons to whom the option is transferred pursuant to the Optionee's will or the laws of inheritance or by the Optionee's designated beneficiary or beneficiaries of that option. (iii) During the applicable post-Service exercise period, the option may not be exercised in the aggregate for more than the number of vested shares for which the option is exercisable on the date of the Optionee's cessation of Service. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon the Optionee's cessation of Service, terminate and cease to be outstanding to the extent it is not exercisable for vested shares on the date of such cessation of Service. (iv) Should the Optionee's Service be terminated for Misconduct or should the Optionee engage in any Misconduct while holding one or more outstanding options under the Plan, then all those options shall terminate immediately and cease to be outstanding. 2. The Plan Administrator shall have the discretion, exercisable either at the time an option is granted or at any time while the option remains outstanding, to: (i) extend the period of time for which the option is to remain exercisable following the Optionee's cessation of Service from the period otherwise in effect for that option to such greater period of time as the Plan Administrator shall deem appropriate, but in no event beyond the expiration of the option term, and/or (ii) permit the option to be exercised, during the applicable post-Service exercise period, not only with respect to the number of vested shares of Common Stock for which such option is exercisable at the time of the Optionee's cessation of Service but also with respect to one or more additional installments in which the Optionee would have vested under the option had the Optionee continued in Service. 5 D. Stockholder Rights. The holder of an option shall have no stockholder rights with respect to the shares subject to the option until such person shall have exercised the option, paid the exercise price and become a holder of record of the purchased shares. E. Repurchase Rights. The Plan Administrator shall have the discretion to grant options which are exercisable for unvested shares of Common Stock. Should the Optionee cease Service while holding such unvested shares, the Corporation shall have the right to repurchase, at the exercise price paid per share, any or all of those unvested shares. The terms upon which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan Administrator and set forth in the document evidencing such repurchase right. F. Limited Transferability of Options. During the lifetime of the Optionee, Incentive Options shall be exercisable only by the Optionee and shall not be assignable or transferable other than by will or by the laws of descent and distribution following the Optionee's death. Non-Statutory Options shall be subject to the same restriction, except that a Non-Statutory Option may, in connection with the Optionee's estate plan, be assigned in whole or in part during the Optionee's lifetime to one or more members of the Optionee's immediate family or to a trust established exclusively for one or more such family members. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate. Notwithstanding the foregoing, the Optionee may also designate one or more persons as the beneficiary or beneficiaries of his or her outstanding options under the Plan, and those options shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon the Optionee's death while holding those options. Such beneficiary or beneficiaries shall take the transferred options subject to all the terms and conditions of the applicable agreement evidencing each such transferred option, including (without limitation) any limited time period for the exercise of that option following the Optionee's death. II. INCENTIVE OPTIONS The terms specified below shall be applicable to all Incentive Options. Except as modified by the provisions of this Section II, all the provisions of the Plan shall be applicable to Incentive Options. Options which are specifically designated as Non-Statutory Options when issued under the Plan shall not be subject to the terms of this Section II. A. Eligibility. Incentive Options may only be granted to Employees. B. Exercise Price. The exercise price per share shall not be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date. 6 C. Dollar Limitation. The aggregate Fair Market Value of the shares of Common Stock (determined as of the respective date or dates of grant) for which one or more options granted to any Employee under the Plan (or any other option plan of the Corporation or any Parent or Subsidiary) may for the first time become exercisable as Incentive Options during any one (1) calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee holds two (2) or more such options which become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability of such options as Incentive Options shall be applied on the basis of the order in which such options are granted. D. 10% Stockholder. If any Employee to whom an Incentive Option is granted is a 10% Stockholder, then the exercise price per share shall not be less than one hundred ten percent (110%) of the Fair Market Value per share of Common Stock on the option grant date, and the option term shall not exceed five (5) years measured from the option grant date. III. CORPORATE TRANSACTION/CHANGE IN CONTROL A. In the event of any Corporate Transaction, each outstanding option shall automatically accelerate so that each such option shall, immediately prior to the effective date of the Corporate Transaction, become fully exercisable for all of the shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares as fully-vested shares of Common Stock. However, an outstanding option shall not so accelerate if and to the extent: (i) such option is, in connection with the Corporate Transaction, either to be assumed by the successor corporation (or parent thereof) or to be replaced with a comparable option to purchase shares of the capital stock of the successor corporation (or parent thereof), (ii) such option is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing on the unvested option shares at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to such option or (iii) the acceleration of such option is subject to other limitations imposed by the Plan Administrator at the time of the option grant. The determination of option comparability under clause (i) above shall be made by the Primary Committee, and its determination shall be final, binding and conclusive. B. All outstanding repurchase rights under the Plan shall also terminate automatically, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of any Corporate Transaction, except to the extent: (i) those repurchase rights are to be assigned to the successor corporation (or parent thereof) in connection with such Corporate Transaction or (ii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued. C. The Plan Administrator shall have the discretion, exercisable either at the time the option is granted or at any time while the option remains outstanding, to provide for the automatic acceleration of one or more outstanding options (and the automatic termination of one or more outstanding repurchase rights with the immediate vesting of the shares of Common 7 Stock subject to those rights) upon the occurrence of a Corporate Transaction, whether or not those options are to be assumed or replaced (or those repurchase rights are to be assigned) in the Corporate Transaction. D. Immediately following the consummation of the Corporate Transaction, all outstanding options shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof). E. Each option which is assumed in connection with a Corporate Transaction shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Corporate Transaction had the option been exercised immediately prior to such Corporate Transaction. Appropriate adjustments shall also be made to (i) the number and class of securities available for issuance under the Plan on both an aggregate and per Optionee basis following the consummation of such Corporate Transaction and (ii) the exercise price payable per share under each outstanding option, provided the aggregate exercise price payable for such securities shall remain the same. To the extent the actual holders of the Corporation's outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Corporate Transaction, the successor corporation may, in connection with the assumption of the outstanding options under this Plan, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such Corporate Transaction. F. Any options which are assumed or replaced in the Corporate Transaction and do not otherwise accelerate at that time, shall automatically accelerate (and any of the Corporation's outstanding repurchase rights which do not otherwise terminate at the time of the Corporate Transaction shall automatically terminate and the shares of Common Stock subject to those terminated rights shall immediately vest in full) in the event the Optionee's Service should subsequently terminate by reason of an Involuntary Termination within twelve (12) months following the effective date of such Corporate Transaction. Any options so accelerated shall remain exercisable for fully-vested shares until the earlier of (i) the expiration of the option term or (ii) the expiration of the one (1)-year period measured from the effective date of the Involuntary Termination. G. The Plan Administrator shall have the discretion, exercisable either at the time the option is granted or at any time while the option remains outstanding, to (i) provide for the automatic acceleration of one or more outstanding options (and the automatic termination of one or more outstanding repurchase rights with the immediate vesting of the shares of Common Stock subject to those rights) upon the occurrence of a Change in Control or (ii) condition any such option acceleration (and the termination of any outstanding repurchase rights) upon the subsequent Involuntary Termination of the Optionee's Service within a specified period following the effective date of such Change in Control. Any options accelerated in connection with a Change in Control shall remain fully exercisable until the expiration or sooner termination of the option term. 8 H. The portion of any Incentive Option accelerated in connection with a Corporate Transaction or Change in Control shall remain exercisable as an Incentive Option only to the extent the applicable One Hundred Thousand Dollar limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option shall be exercisable as a Non-Statutory Option under the Federal tax laws. I. The grant of options under the Option Grant Program shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. IV. CANCELLATION AND REGRANT OF OPTIONS The Plan Administrator shall have the authority to effect, at any time and from time to time, with the consent of the affected option holders, the cancellation of any or all outstanding options under the Option Grant Program (including outstanding options incorporated from the Predecessor Plan) and to grant in substitution new options covering the same or different number of shares of Common Stock but with an exercise price per share based on the Fair Market Value per share of Common Stock on the new option grant date. V. STOCK APPRECIATION RIGHTS A. The Plan Administrator shall have full power and authority to grant to selected Optionees tandem stock appreciation rights and/or limited stock appreciation rights. B. The following terms shall govern the grant and exercise of tandem stock appreciation rights: (i) One or more Optionees may be granted the right, exercisable upon such terms as the Plan Administrator may establish, to elect between the exercise of the underlying option for shares of Common Stock and the surrender of that option in exchange for a distribution from the Corporation in an amount equal to the excess of (A) the Fair Market Value (on the option surrender date) of the number of shares in which the Optionee is at the time vested under the surrendered option (or surrendered portion thereof) over (B) the aggregate exercise price payable for such shares. (ii) No such option surrender shall be effective unless it is approved by the Plan Administrator. If the surrender is so approved, then the distribution to which the Optionee shall be entitled may be made in shares of Common Stock valued at Fair Market Value on the option surrender date, in cash, or partly in shares and partly in cash, as the Plan Administrator shall in its sole discretion deem appropriate. 9 (iii) If the surrender of an option is rejected by the Plan Administrator, then the Optionee shall retain whatever rights the Optionee had under the surrendered option (or surrendered portion thereof) on the option surrender date and may exercise such rights at any time prior to the later of (A) five (5) business days after the receipt of the rejection notice or (B) the last day on which the option is otherwise exercisable in accordance with the terms of the documents evidencing such option, but in no event may such rights be exercised more than ten (10) years after the option grant date. C. The following terms shall govern the grant and exercise of limited stock appreciation rights: (i) One or more Section 16 Insiders may be granted limited stock appreciation rights with respect to their outstanding options. (ii) Upon the occurrence of a Hostile Take-Over, each such individual holding one or more options with such a limited stock appreciation right shall have the unconditional right (exercisable for a thirty (30)-day period following such Hostile Take-Over) to surrender each such option to the Corporation, to the extent the option is at the time exercisable for vested shares of Common Stock. In return for the surrendered option, the Optionee shall receive a cash distribution from the Corporation in an amount equal to the excess of (A) the Take-Over Price of the shares of Common Stock which are at the time vested under each surrendered option (or surrendered portion thereof) over (B) the aggregate exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following the option surrender date. (iii) The Plan Administrator shall pre-approve, at the time the limited right is granted, the subsequent exercise of that right in accordance with the terms of the grant and the provisions of this Section V.C. No additional approval of the Plan Administrator or the Board shall be required at the time of the actual option surrender and cash distribution. (iv) The balance of the option (if any) shall continue in full force and effect in accordance with the documents evidencing such option. 10 ARTICLE THREE MISCELLANEOUS I. FINANCING A. The Plan Administrator may permit any Optionee to pay the option exercise price by delivering a full-recourse, interest bearing promissory note payable in one or more installments. The terms of any such promissory note (including the interest rate and the terms of repayment) shall be established by the Plan Administrator in its sole discretion. In no event may the maximum credit available to the Optionee exceed the sum of (i) the aggregate option exercise price payable for the purchased shares (less the par value of such shares) plus (ii) any Federal, state and local income and employment tax liability incurred by the Optionee in connection with the option exercise. B. The Plan Administrator may, in its discretion, determine that one or more such promissory notes shall be subject to forgiveness by the Corporation in whole or in part upon such terms as the Plan Administrator may deem appropriate. II. TAX WITHHOLDING A. The Corporation's obligation to deliver shares of Common Stock upon the exercise of options or stock appreciation rights under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income and employment tax withholding requirements. B. The Plan Administrator may, in its discretion, provide any or all holders of Non-Statutory Options with the right to use shares of Common Stock in satisfaction of all or part of the Withholding Taxes to which such holders may be subject in connection with the exercise of their options. Such right may be provided to any such holder in either or both of the following formats: (i) Stock Withholding: The election to have the Corporation withhold, from the shares of Common Stock otherwise issuable upon the exercise of such Non-Statutory Option, a portion of those shares with an aggregate Fair Market Value equal to the percentage of the Withholding Taxes (not to exceed one hundred percent (100%)) designated by the holder. (ii) Stock Delivery: The election to deliver to the Corporation, at the time the Non-Statutory Option is exercised, one or more shares of Common Stock previously acquired by such holder (other than in connection with the option exercise triggering the Withholding Taxes) with an aggregate Fair Market Value equal to the percentage of the Withholding Taxes (not to exceed one hundred percent (100%)) designated by the holder. 11 III. EFFECTIVE DATE AND TERM OF THE PLAN A. The Plan became effective on the November 7, 1995 Effective Date after adoption by the Board on July 25, 1995, and approval by the Corporation's stockholders in August 1995. B. The Plan was amended on February 10, 1997 (the "February 1997 Amendment") to effect the following changes: (i) increase the number of shares of Common Stock authorized for issuance over the term of the Plan by an additional 5,000,000 shares, (ii) render the non-employee Board members eligible to receive option grants under the Plan, (iii) allow unvested shares issued under the Plan and subsequently repurchased by the Corporation at the option exercise price paid per share to be reissued under the Plan and (iv) effect a series of technical changes to the provisions of the Plan (including the stockholder approval requirements) in order to take advantage of the recent amendments to Rule 16b-3 of the Securities Exchange Act of 1934 which exempts certain officer and director transactions under the Plan from the short-swing liability provisions of the Federal securities laws. The February 1997 Amendment was approved at the 1997 Annual Meeting. All option grants made prior to the February 1997 Amendment shall remain outstanding in accordance with the terms and conditions of the respective instruments evidencing those options or issuances, and nothing in the February 1997 Amendment shall be deemed to modify or in any way affect those outstanding options or issuances. The Plan was amended on December 17, 1998 (the "December 1998 Amendment") to effect the following changes: (i) increase the number of shares of Common Stock authorized for issuance over the term of the Plan by an additional 7,000,000 shares and (ii) implement the automatic share increase provisions of Section IV.B of Article One. The December 1998 Amendment was approved by the stockholders at the 1999 Annual Meeting and no option grants made on the basis of the 7,000,000-share increase authorized by that amendment became exercisable in whole or in part until such stockholder approval was obtained. The Plan was amended and restated by the Board in May 2000 to effect certain changes in the administrative provisions of the Plan, including the delegation of administrative authority to the Secondary Committee, the authorization of beneficiary designations for outstanding options and the establishment of procedures for the assumption of outstanding options in connection with a Corporate Transaction effected through cash consideration. Subject to the foregoing limitations, options may be granted under the Plan at any time before the date fixed herein for the termination of the Plan. C. The Plan shall serve as the successor to the Predecessor Plan, and no further option grants shall be made under the Predecessor Plan after the Effective Date. All options outstanding under the Predecessor Plan as of such date shall, immediately upon approval of the Plan by the Corporation's stockholders, be incorporated into the Plan and treated as outstanding options under the Plan. However, each outstanding option so incorporated shall continue to be governed solely by the terms of the documents evidencing such option, and no provision of the Plan shall be deemed to affect or otherwise modify the rights or obligations of the holders of such incorporated options with respect to their acquisition of shares of Common Stock. 12 D. The provisions of the Plan (including, without limitation, the option/vesting acceleration provisions of Article Two relating to Corporate Transactions and Changes in Control) may, in the Plan Administrator's discretion, be extended to one or more options incorporated from the Predecessor Plan which do not otherwise provide for such acceleration. E. The Plan shall terminate upon the earliest of (i) July 24, 2005, (ii) the date on which all shares available for issuance under the Plan have been issued pursuant to the exercise of the options under the Plan or (iii) the termination of all outstanding options in connection with a Corporate Transaction. Upon such Plan termination, all options outstanding on such date shall thereafter continue to have force and effect in accordance with the provisions of the documents evidencing such options. IV. AMENDMENT OF THE PLAN A. The Board shall have complete and exclusive power and authority to amend or modify the Plan in any or all respects. However, no such amendment or modification shall adversely affect the rights and obligations with respect to options or stock appreciation rights at the time outstanding under the Plan unless the Optionee consents to such amendment or modification. In addition, certain amendments may require stockholder approval in accordance with applicable laws and regulations. B. Options to purchase shares of Common Stock may be granted that are in excess of the number of shares then available for issuance under the Plan, provided any excess shares actually issued are held in escrow until stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock available for issuance under the Plan is obtained. If such stockholder approval is not obtained within twelve (12) months after the date the first such excess issuances are made, then (i) any unexercised options granted on the basis of such excess shares shall terminate and cease to be outstanding and (ii) the Corporation shall promptly refund to the Optionees the exercise price paid for any excess shares issued under the Plan and held in escrow, together with interest (at the applicable Short Term Federal Rate) for the period the shares were held in escrow, and such shares shall thereupon be automatically cancelled and cease to be outstanding. V. REGULATORY APPROVALS A. The implementation of the Plan, the granting of any option or stock appreciation right under the Plan and the issuance of any shares of Common Stock upon the exercise of any option or stock appreciation right shall be subject to the Corporation's procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the options and stock appreciation rights granted under it and the shares of Common Stock issued pursuant to it. 13 B. No shares of Common Stock or other assets shall be issued or delivered under the Plan unless and until there shall have been compliance with all applicable requirements of Federal and state securities laws, including the filing and effectiveness of the Form S-8 registration statement for the shares of Common Stock issuable under the Plan, and all applicable listing requirements of any stock exchange (or the Nasdaq National Market, if applicable) on which Common Stock is then listed for trading. VI. USE OF PROCEEDS Any cash proceeds received by the Corporation from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes. VII. NO EMPLOYMENT/SERVICE RIGHTS Nothing in the Plan shall confer upon the Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary employing or retaining such person) or of the Optionee, which rights are hereby expressly reserved by each, to terminate such person's Service at any time for any reason, with or without cause. 14 APPENDIX The following definitions shall be in effect under the Plan: A. Board shall mean the Corporation's Board of Directors. B. Change in Control shall mean a change in ownership or control of the Corporation effected through either of the following transactions: (i) the acquisition, directly or indirectly, by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities pursuant to a tender or exchange offer made directly to the Corporation's stockholders, or (ii) a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination. C. Code shall mean the Internal Revenue Code of 1986, as amended. D. Common Stock shall mean the Corporation's common stock. E. Corporate Transaction shall mean either of the following stockholder-approved transactions to which the Corporation is a party: (i) a merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities are transferred to a person or persons different from the persons holding those immediately prior to such transaction; or (ii) the sale, transfer or other disposition of all or substantially all of the Corporation's assets in complete liquidation or dissolution of the Corporation. F. Corporation shall mean SanDisk Corporation, a Delaware corporation. G. Effective Date shall mean November 7, 1995, the date on which the Underwriting Agreement was executed and the initial public offering price of the Common Stock was established. A-1 H. Employee shall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance. I. Exercise Date shall mean the date on which the Corporation shall have received written notice of the option exercise. J. Fair Market Value per share of Common Stock on any relevant date shall be determined in accordance with the following provisions: (i) If the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question, as such price is reported by the National Association of Securities Dealers on the Nasdaq National Market. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. (ii) If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. K. Hostile Take-Over shall mean a change in ownership of the Corporation effected through the acquisition, directly or indirectly, by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities pursuant to a tender or exchange offer made directly to the Corporation's stockholders which the Board does not recommend such stockholders to accept. L. Incentive Option shall mean an option which satisfies the requirements of Code Section 422. M. Involuntary Termination shall mean the termination of the Service of any individual which occurs by reason of: (i) such individual's involuntary dismissal or discharge by the Corporation for reasons other than Misconduct, or A-2 (ii) such individual's voluntary resignation following (A) a change in his or her position with the Corporation which materially reduces his or her level of responsibility, (B) a reduction in his or her level of compensation (including base salary, fringe benefits and participation in corporate-performance based bonus or incentive programs) by more than fifteen percent (15%) or (C) a relocation of such individual's place of employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is effected by the Corporation without the individual's consent. N. Misconduct shall mean the commission of any act of fraud, embezzlement or dishonesty by the Optionee, any unauthorized use or disclosure by such person of confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or any other intentional misconduct by such person adversely affecting the business or affairs of the Corporation (or any Parent or Subsidiary) in a material manner. The foregoing definition shall not in any way preclude or restrict the right of the Corporation (or any Parent or Subsidiary) to discharge or dismiss any Optionee or other person in the Service of the Corporation (or any Parent or Subsidiary) for any other acts or omissions, but such other acts or omissions shall not be deemed, for purposes of the Plan, to constitute grounds for termination for Misconduct. O. 1934 Act shall mean the Securities Exchange Act of 1934, as amended. P. Non-Statutory Option shall mean an option not intended to satisfy the requirements of Code Section 422. Q. Option Grant Program shall mean the option grant program in effect under the Plan. R. Optionee shall mean any person to whom an option is granted under the Plan. S. Parent shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. T. Permanent Disability or Permanently Disabled shall mean the inability of the Optionee to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more. U. Plan shall mean the Corporation's 1995 Stock Option Plan, as set forth in this document. A-3 V. Plan Administrator shall mean shall mean the particular entity, whether the Primary Committee, the Board or the Secondary Committee, which is authorized to administer the Plan with respect to one or more classes of eligible persons, to the extent such entity is carrying out its administrative functions under the Plan with respect to the persons under its jurisdiction. W. Predecessor Plan shall mean the Corporation's existing 1989 Stock Benefit Plan. X. Primary Committee shall mean the committee of two (2) or more non-employee Board members appointed by the Board to administer the Plan with respect to Section 16 Insiders. Y. Secondary Committee shall mean a committee of one or more Board members appointed by the Board to administer the Plan with respect to eligible persons other than Section 16 Insiders. Z. Section 16 Insider shall mean an officer or director of the Corporation subject to the short-swing profit liabilities of Section 16 of the 1934 Act. AA. Section 12(g) Registration Date shall mean the first date on which the Common Stock is registered under Section 12(g) of the 1934 Act. BB. Service shall mean the provision of services to the Corporation (or any Parent or Subsidiary) by a person in the capacity of an Employee, a non-employee member of the board of directors or a consultant or independent advisor, except to the extent otherwise specifically provided in the documents evidencing the option grant. CC. Stock Exchange shall mean either the American Stock Exchange or the New York Stock Exchange. DD. Subsidiary shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. EE. Take-Over Price shall mean the greater of (i) the Fair Market Value per share of Common Stock on the date the option is surrendered to the Corporation in connection with a Hostile Take-Over or (ii) the highest reported price per share of Common Stock paid by the tender offeror in effecting such Hostile Take-Over. However, if the surrendered option is an Incentive Option, the Take-Over Price shall not exceed the clause (i) price per share. A-4 FF. 10% Stockholder shall mean the owner of stock (as determined under Code Section 424(d)) possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation (or any Parent or Subsidiary). GG. Underwriting Agreement shall mean the agreement between the Corporation and the underwriter or underwriters which managed the initial public offering of the Common Stock. HH. Withholding Taxes shall mean the Federal, state and local income and employment withholding taxes to which the holder of Non-Statutory Options or unvested shares of Common Stock may become subject in connection with the exercise of such holder's options or the vesting of his or her shares. A-5 EX-99.2 6 dex992.txt SANDISK CORPORATION EMPLOYEE STOCK PURCHASE PLAN Exhibit 99.2 SANDISK CORPORATION EMPLOYEE STOCK PURCHASE PLAN AMENDED AND RESTATED JANUARY 2, 2002 I. PURPOSE OF THE PLAN This Employee Stock Purchase Plan is intended to promote the interests of SanDisk Corporation by providing eligible employees with the opportunity to acquire a proprietary interest in the Corporation through participation in a payroll-deduction based employee stock purchase plan designed to qualify under Section 423 of the Code. All share numbers in this document have been adjusted to reflect the 2-for-3 split of the Common Stock effected on August 28, 1995 and the 2-for-1 split of Common Stock effected on February 22, 2000 Capitalized terms herein shall have the meanings assigned to such terms in the attached Appendix. II. ADMINISTRATION OF THE PLAN The Plan Administrator shall have full authority to interpret and construe any provision of the Plan and to adopt such rules and regulations for administering the Plan as it may deem necessary in order to comply with the requirements of Code Section 423. Decisions of the Plan Administrator shall be final and binding on all parties having an interest in the Plan. III. STOCK SUBJECT TO PLAN A. The stock purchasable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares of Common Stock purchased on the open market. The maximum number of shares of Common Stock which may be issued in the aggregate over the term of this Plan and the Corporation's International Employee Stock Purchase Plan shall not exceed Two Million Six Hundred Sixty-One Thousand Sixty-Two (2,661,062) shares. Such share reserve includes (i) the initial share reserve of 866,666 shares approved by the stockholders in August 1996, (ii) an additional 900,000 share increase authorized by the Board on February 10, 1997 and approved by the stockholders at the 1997 Annual Meeting, (iii) an additional 600,000 share increase authorized by the Board on December 17, 1998 and approved by the stockholders at the 1999 Annual Meeting and (iv) an additional Two Hundred Ninety-Four Thousand Three Hundred Ninety-Six (294,396) shares added to the reserve pursuant to the automatic share increase effected in January 2002. In no event shall more than 1,777,306 shares of Common Stock be issued in the aggregate under this Plan and the International Employee Stock Purchase Plan after March 15, 1999. B. The number of shares of Common Stock available for issuance under the combined reserve of this Plan and the International Plan shall automatically increase on the first trading day of January each calendar year during the term of the Plan, beginning with calendar year 2002, by an amount equal to forty-three one hundredths of one percent (0.43%) of the shares of Common Stock outstanding on the last trading day in December of the immediately preceding calendar year, but in no event shall any such annual increase exceed 400,000 shares. C. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration, appropriate adjustments shall be made to (i) the maximum number and class of securities issuable in the aggregate under this Plan and the International Plan, (ii) the maximum number and/or class of securities by which the combined share reserve under this Plan and the International Plan is to increase each calendar year pursuant to the provisions of Section III.B, (iii) the maximum number and class of securities purchasable per Participant on any one Purchase Date and (iv) the number and class of securities and the price per share in effect under each outstanding purchase right in order to prevent the dilution or enlargement of benefits thereunder. IV. OFFERING PERIODS A. Shares of Common Stock shall be offered for purchase under the Plan through a series of successive Offering Periods until such time as (i) the maximum number of shares of Common Stock available for issuance under the Plan shall have been purchased or (ii) the Plan shall have been sooner terminated. B. Each Offering Period (other than the Initial Offering Period) shall have a duration of six (6) months. Offering Periods shall run from the first business day in February to the last business day in July each year and from the first business day of August each year to the last business day in January in the following year. However, the Initial Offering Period shall commence at the Effective Time and terminate on the last business day in January, 1997. During the Initial Offering Period, there shall be three (3) successive Purchase Intervals: the first shall run from the Effective Time to the last business day in January 1996; the second shall run from the first business day in February 1996 to the last business day in July 1996; and the last shall run from the first business day in August to the last business day in January 1997. A Purchase Date shall occur at the end of each Purchase Interval within the Initial Offering Period. However, for each subsequent Offering Period, there shall only be a single Purchase Date coincident with the last day of that Offering Period. V. ELIGIBILITY A. Only individuals who are Eligible Employees on the start date of an Offering Period shall be eligible to participate in the Plan for that Offering Period. For the Initial Offering Period, the following special eligibility provisions shall be in effect: - Each individual who is an Eligible Employee at the Effective Time may enter the Initial Offering Period at that time or on the start date of any subsequent Purchase Interval within that Offering Period, provided he or she remains an Eligible Employee on that date. - Each individual who first becomes an Eligible Employee after the Effective Time may enter the Initial Offering Period on the start date of any 2 subsequent Purchase Interval within that Offering Period, provided he or she is an Eligible Employee on that date. B. The date an Eligible Employee enters the Offering Period shall be designated his or her Entry Date. C. To participate in the Plan for a particular Offering Period, the Eligible Employee must complete the enrollment forms prescribed by the Plan Administrator (including a stock purchase agreement and a payroll deduction authorization form) and file such forms with the Plan Administrator (or its designate) on or before his or her scheduled Entry Date. VI. PAYROLL DEDUCTIONS A. The payroll deduction authorized by the Participant for purposes of acquiring shares of Common Stock under the Plan may be any multiple of one percent (1%) of the Cash Compensation paid to the Participant during each Offering Period, up to a maximum of ten percent (10%). The deduction rate so authorized shall continue in effect from Offering Period to Offering Period, except to the extent such rate is changed in accordance with the following guidelines: (i) The Participant may, at any time during an Offering Period, reduce his or her rate of payroll deduction to become effective as soon as possible after filing the appropriate form with the Plan Administrator. The Participant may not, however, effect more than one (1) such reduction per Offering Period or Purchase Interval. (ii) The Participant may, prior to the start of any new Offering Period or the start of any new Purchase Interval within the Initial Offering Period, increase the rate of his or her payroll deduction by filing the appropriate form with the Plan Administrator. The new rate (which may not exceed the ten percent (10%) maximum) shall become effective as of the start date of the first Offering Period or Purchase Interval following the filing of such form. B. Payroll deductions shall begin on the first pay day following the Participant's Entry Date into the Offering Period and shall (unless sooner terminated by the Participant) continue through the pay day ending with or immediately prior to the last day of that Offering Period. The amounts so collected shall be credited to the Participant's book account under the Plan, but no interest shall be paid on the balance from time to time outstanding in such account. The amounts collected from the Participant shall not be held in any segregated account or trust fund and may be commingled with the general assets of the Corporation and used for general corporate purposes. C. Payroll deductions shall automatically cease upon the termination of the Participant's purchase right in accordance with the provisions of the Plan. D. The Participant's acquisition of Common Stock under the Plan on any Purchase Date shall neither limit nor require the Participant's acquisition of Common Stock on any subsequent Purchase Date. 3 VII. PURCHASE RIGHTS A. Grant of Purchase Right. A Participant shall be granted a separate purchase right for each Offering Period in which he or she participates. The purchase right shall be granted on the Participant's Entry Date into the Offering Period and shall provide the Participant with the right to purchase shares of Common Stock upon the terms set forth below. The Participant shall execute a stock purchase agreement embodying such terms and such other provisions (not inconsistent with the Plan) as the Plan Administrator may deem advisable. Under no circumstances shall purchase rights be granted under the Plan to any Eligible Employee if such individual would, immediately after the grant, own (within the meaning of Code Section 424(d)) or hold outstanding options or other rights to purchase, stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Corporation or any Corporate Affiliate. B. Exercise of the Purchase Right. The purchase right shall be automatically exercised on each Purchase Date within the Offering Period, and shares of Common Stock shall accordingly be purchased on behalf of the Participant (other than any Participant whose payroll deductions have previously been refunded in accordance with the Termination of Purchase Right provisions below) on such Purchase Date. The purchase shall be effected by applying the Participant's payroll deductions for the Offering Period or the Purchase Interval to the purchase of whole shares of Common Stock at the purchase price in effect for the Participant for the Purchase Date coincident with the last day of that Offering Period or Purchase Interval. All shares purchased on Participant's behalf shall be directly deposited into an account maintained for such Participant at a Corporation-designated brokerage firm. C. Purchase Price. The purchase price per share at which Common Stock shall be purchased on the Participant's behalf on each Purchase Date within the Offering Period shall be equal to eighty-five percent (85%) of the lower of (i) the Fair Market Value per share of Common Stock on the Participant's Entry Date into that Offering Period or (ii) the Fair Market Value per share of Common Stock on that Purchase Date. However, for each Participant who joins the Initial Offering Period after the start date, the clause (i) amount shall in no event be less than the Fair Market Value per share of Common Stock on the start date of the Initial Offering Period. D. Number of Purchasable Shares. The number of shares of Common Stock purchasable by a Participant on each Purchase Date shall be the number of whole shares obtained by dividing the Participant's payroll deductions for the Offering Period or Purchase Interval ending on such date by the purchase price in effect for the Participant for that Purchase Date. However, the maximum number of shares of Common Stock purchasable per Participant on any one Purchase Date shall not exceed One Thousand Five Hundred (1,500) shares, subject to periodic adjustments in the event of certain changes in the Corporation's capitalization. However, the Plan Administrator shall have the discretionary authority, exercisable prior to the start of any Offering Period, to increase or decrease the limitation to be in effect for the number of shares purchasable per Participant on the Purchase Date for that Offering Period. 4 E. Excess Payroll Deductions. Any payroll deductions not applied to the purchase of shares of Common Stock on any Purchase Date because they are not sufficient to purchase a whole share of Common Stock shall be held for the purchase of Common Stock on the next Purchase Date. However, any payroll deductions not applied to the purchase of Common Stock by reason of the limitation on the maximum number of shares purchasable by the Participant on the Purchase Date shall be promptly refunded. F. Termination of Purchase Right. The following provisions shall govern the termination of outstanding purchase rights: (i) A Participant may, at any time prior to the next scheduled Purchase Date, terminate his or her outstanding purchase right by filing the appropriate form with the Plan Administrator (or its designate), and no further payroll deductions shall be collected from the Participant with respect to the terminated purchase right. Any payroll deductions collected during the Offering Period or Purchase Interval in which such termination occurs shall, at the Participant's election, be immediately refunded or held for the purchase of shares on the next scheduled Purchase Date. If no such election is made at the time such purchase right is terminated, then the payroll deductions collected with respect to the terminated right shall be refunded as soon as possible. (ii) The termination of such purchase right shall be irrevocable, and the Participant may not subsequently rejoin the Offering Period for which the terminated purchase right was granted. In order to resume participation in any subsequent Offering Period, such individual must re-enroll in the Plan (by making a timely filing of the prescribed enrollment forms) on or before the start date of that Offering Period. (iii) Should the Participant cease to remain an Eligible Employee for any reason (including death, disability or change in status) while his or her purchase right remains outstanding, then that purchase right shall immediately terminate, and all of the Participant's payroll deductions for the Offering Period or Purchase Interval in which the purchase right so terminates shall be immediately refunded. However, should the Participant cease to remain in active service by reason of an approved unpaid leave of absence, then the Participant shall have the election, exercisable up until the last day of the Offering Period or Purchase Interval in which such leave commences, to (a) withdraw all the payroll deductions collected to date on his or her behalf for such Offering Period or Purchase Interval or (b) have such funds held for the purchase of shares on the next scheduled Purchase Date. In no event, however, shall any further payroll deductions be collected on the Participant's behalf during such leave. Upon the Participant's return to active service (x) within ninety (90) days following the commencement of such leave or (y) prior to the expiration of any longer period for which such Participant's right to reemployment with the Corporation is guaranteed by either statute or contract, his or her payroll deductions under the Plan shall automatically resume at the rate in effect at the time the leave began, unless the Participant withdraws from the Plan prior to his or her return. An individual who returns to active employment following a leave of absence which exceeds in duration the applicable (x) or (y) time period will be treated as a new 5 Employee for purposes of subsequent participation in the Plan and must accordingly re-enroll in the Plan (by making a timely filing of the prescribed enrollment forms) on or before the start date of any new Offering Period or Purchase Interval. G. Corporate Transaction. Each outstanding purchase right shall automatically be exercised, immediately prior to the effective date of any Corporate Transaction, by applying the payroll deductions of each Participant to the purchase of whole shares of Common Stock at a purchase price per share equal to eighty-five percent (85%) of the lower of (i) the Fair Market Value per share of Common Stock on the Participant's Entry Date into the Offering Period in which such Corporate Transaction occurs or (ii) the Fair Market Value per share of Common Stock immediately prior to the effective date of such Corporate Transaction. However, the applicable limitation on the number of shares of Common Stock purchasable per Participant shall continue to apply to each purchase. The Corporation shall use its best efforts to provide at least ten (10)-days prior written notice of the occurrence of any Corporate Transaction, and Participants shall, following the receipt of such notice, have the right to terminate their outstanding purchase rights prior to the effective date of the Corporate Transaction. H. Proration of Purchase Rights. Should the total number of shares of Common Stock to be purchased pursuant to outstanding purchase rights on any particular date exceed the number of shares then available for issuance under the Plan, the Plan Administrator shall make a pro-rata allocation of the available shares on a uniform and nondiscriminatory basis, and the payroll deductions of each Participant, to the extent in excess of the aggregate purchase price payable for the Common Stock pro-rated to such individual, shall be refunded. I. Assignability. During the Participant's lifetime, the purchase right shall be exercisable only by the Participant and shall not be assignable or transferable. J. Stockholder Rights. A Participant shall have no stockholder rights with respect to the shares subject to his or her outstanding purchase right until the shares are purchased on the Participant's behalf in accordance with the provisions of the Plan and the Participant has become a holder of record of the purchased shares. VIII. ACCRUAL LIMITATIONS A. No Participant shall be entitled to accrue rights to acquire Common Stock pursuant to any purchase right outstanding under this Plan if and to the extent such accrual, when aggregated with (i) rights to purchase Common Stock accrued under any other purchase right granted under this Plan and (ii) similar rights accrued under other employee stock purchase plans (within the meaning of Code Section 423) of the Corporation or any Corporate Affiliate, would otherwise permit such Participant to purchase more than Twenty-Five Thousand Dollars ($25,000) worth of stock of the Corporation or any Corporate Affiliate (determined on the basis of the Fair Market Value of such stock on the date or dates such rights are granted) for each calendar year such rights are at any time outstanding. 6 B. For purposes of applying such accrual limitations to the purchase rights granted under this Plan, the following provisions shall be in effect: (i) The right to acquire Common Stock under each outstanding purchase right shall accrue in one or more installments on each Purchase Date within the Offering Period for which such right is granted. (ii) No right to acquire Common Stock under any outstanding purchase right shall accrue to the extent the Participant has already accrued in the same calendar year the right to acquire Common Stock under one (1) or more other purchase rights at a rate equal to Twenty-Five Thousand Dollars ($25,000) worth of Common Stock (determined on the basis of the Fair Market Value of such stock on the date or dates of grant) for each calendar year such rights were at any time outstanding. C. If by reason of such accrual limitations, the purchase right of a Participant does not accrue for a particular Offering Period (or a particular Purchase Interval within the Initial Offering Period), then the payroll deductions which the Participant made during that Offering Period (or Purchase Interval) with respect to such unaccrued purchase right shall be promptly refunded. D. In the event there is any conflict between the provisions of this Article and one or more provisions of the Plan or any instrument issued thereunder, the provisions of this Article shall be controlling. IX. EFFECTIVE DATE AND TERM OF THE PLAN A. The Plan was adopted by the Board on July 25, 1995 and shall become effective at the Effective Time, provided no purchase rights granted under the Plan shall be exercised, and no shares of Common Stock shall be issued hereunder, until (i) the Plan shall have been approved by the stockholders of the Corporation and (ii) the Corporation shall have complied with all applicable requirements of the 1933 Act (including the registration of the shares of Common Stock issuable under the Plan on a Form S-8 registration statement filed with the Securities and Exchange Commission), all applicable listing requirements of any stock exchange (or the Nasdaq National Market, if applicable) on which the Common Stock is listed for trading and all other applicable requirements established by law or regulation. In the event such stockholder approval is not obtained, or such compliance is not effected, within twelve (12) months after the date on which the Plan is adopted by the Board, the Plan shall terminate and have no further force or effect and all sums collected from Participants during the Initial Offering Period shall be refunded. B. Unless sooner terminated by the Board, the Plan shall terminate upon the earliest of (i) the last business day in July 2005, (ii) the date on which all shares available for issuance under the Plan shall have been sold pursuant to purchase rights exercised under the Plan or (iii) the date on which all purchase rights are exercised in connection with a Corporate Transaction. No further purchase rights shall be granted or exercised, and no further payroll deductions shall be collected, under the Plan following such termination. 7 X. AMENDMENT OF THE PLAN A. The Board may alter, amend, suspend or discontinue the Plan at any time to become effective immediately following the close of any Offering Period or Purchase Interval. However, the Board may not, without the approval of the Corporation's stockholders, (i) materially increase the number of shares of Common Stock issuable under the Plan, except for permissible adjustments in the event of certain changes in the Corporation's capitalization, (ii) alter the purchase price formula so as to reduce the purchase price payable for the shares of Common Stock purchasable under the Plan or (iii) modify the requirements for eligibility to participate in the Plan. B. On February 10, 1997, the Board adopted an amendment to the Plan to increase the number of shares of Common Stock authorized for issuance under this Plan and the International Employee Stock Purchase Plan by an additional 900,000 shares in the aggregate. This amendment was approved by the stockholders at the 1997 Annual Meeting. C. On December 17, 1998, the Board adopted amendments to the plan to (i) increase the number of shares of Common Stock authorized for issuance in the aggregate under this Plan and the International Employee Stock Purchase Plan by an additional 600,000 shares and (ii) to implement the automatic share increase provisions of Section III.B. These amendments were approved by the stockholders at the 1999 Annual Meeting. XI. GENERAL PROVISIONS A. All costs and expenses incurred in the administration of the Plan shall be paid by the Corporation. B. Nothing in the Plan shall confer upon the Participant any right to continue in the employ of the Corporation or any Corporate Affiliate for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Corporate Affiliate employing such person) or of the Participant, which rights are hereby expressly reserved by each, to terminate such person's employment at any time for any reason, with or without cause. C. The provisions of the Plan shall be governed by the laws of the State of California without resort to that State's conflict-of-laws rules. 8 Schedule A Corporations Participating in Employee Stock Purchase Plan As of the Effective Time SanDisk Corporation APPENDIX The following definitions shall be in effect under the Plan: A. Board shall mean the Corporation's Board of Directors. B. Cash Compensation shall mean the (i) regular base salary paid to a Participant by one or more Participating Companies during such individual's period of participation in one or more Offering Periods under the Plan, plus (ii) any pre-tax contributions made by the Participant to any Code Section 401(k) salary deferral plan or any Code Section 125 cafeteria benefit program now or hereafter established by the Corporation or any Corporate Affiliate, plus (iii) all of the following amounts to the extent paid in cash: overtime payments, bonuses, commissions, profit-sharing distributions and other incentive-type payments. However, Eligible Earnings shall not include any contributions (other than Code Section 401(k) or Code Section 125 contributions) made on the Participant's behalf by the Corporation or any Corporate Affiliate to any deferred compensation plan or welfare benefit program now or hereafter established. C. Code shall mean the Internal Revenue Code of 1986, as amended. D. Common Stock shall mean the Corporation's common stock. E. Corporate Affiliate shall mean any parent or subsidiary corporation of the Corporation (as determined in accordance with Code Section 424), whether now existing or subsequently established. F. Corporate Transaction shall mean either of the following stockholder-approved transactions to which the Corporation is a party: (i) a merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction, or (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Corporation in complete liquidation or dissolution of the Corporation. G. Corporation shall mean SanDisk Corporation, a Delaware corporation, and any corporate successor to all or substantially all of the assets or voting stock of SanDisk Corporation which shall by appropriate action adopt the Plan. H. Effective Time shall mean November 7, 1995, the time at which the Underwriting Agreement was executed and finally priced. Any Corporate Affiliate which becomes a Participating Corporation after such Effective Time shall designate a subsequent Effective Time with respect to its employee-Participants. A-1 I. Eligible Employee shall mean any person who is employed by a Participating Company on a basis under which he or she is regularly expected to render more than twenty (20) hours of service per week for more than five (5) months per calendar year for earnings considered wages under Code Section 3401(a). J. Entry Date shall mean the date an Eligible Employee first commences participation in the Offering Period in effect under the Plan. The earliest Entry Date under the Plan shall be the Effective Time. K. Fair Market Value per share of Common Stock on any relevant date shall be determined in accordance with the following provisions: (i) If the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question, as such price is reported by the National Association of Securities Dealers on the Nasdaq National Market or any successor system. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. (ii) If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. L. Initial Offering Period shall mean the first Offering Period in effect under the Plan which began at the Effective Time and ended on the last business day in January 1997. M. 1933 Act shall mean the Securities Act of 1933, as amended. N. Offering Period shall mean each successive period during which payroll deductions are to be collected on the behalf of Participants and applied to the purchase of Common Stock on one or more Purchase Dates within that period. O. Participant shall mean any Eligible Employee of a Participating Corporation who is actively participating in the Plan. P. Participating Corporation shall mean the Corporation and such Corporate Affiliate or Affiliates as may be authorized from time to time by the Board to extend the benefits of the Plan to their Eligible Employees. The Participating Corporations in the Plan as of the Effective Time are listed in attached Schedule A. A-2 Q. Plan shall mean the Corporation's Employee Stock Purchase Plan, as set forth in this document. R. Plan Administrator shall mean the committee of two (2) or more Board members appointed by the Board to administer the Plan. S. Purchase Date shall mean the last business day of January and July each year on which shares of Common Stock shall be purchased on behalf of each Participant. T. Purchase Interval shall mean each of three (3) successive periods within the Initial Offering Period at the end of which there shall be purchased shares of Common Stock on behalf of each Participant. The first Purchase Interval shall begin at the Effective Time and end on the last business day in January 1996; the second Purchase Interval shall begin on the first business day in February 1996 and end on the last business day in July 1996; and the final Purchase Interval shall begin on the first business day in August 1996 and end on the last business day in January 1997. U. Stock Exchange shall mean either the American Stock Exchange or the New York Stock Exchange. V. Underwriting Agreement shall mean the agreement between the Corporation and the underwriter or underwriters which managed the initial public offering of the Common Stock. A-3 EX-99.3 7 dex993.txt SANDISK CORPORATION INTERNATIONAL EMPLOYEE STOCK Exhibit 99.3 SANDISK CORPORATION INTERNATIONAL EMPLOYEE STOCK PURCHASE PLAN AMENDED AND RESTATED JANUARY 2, 2002 I. PURPOSE OF THE PLAN This International Employee Stock Purchase Plan is intended to promote the interests of SanDisk Corporation by providing eligible employees of the Corporation's Foreign Subsidiaries with the opportunity to acquire a proprietary interest in the Corporation through the purchase of shares of the Corporation's common stock at periodic intervals with their accumulated payroll deductions. All share numbers in this document have been adjusted to reflect the 2-for-3 split of the Common Stock authorized by the Board on August 28, 1995 and the 2-for-1 split of Common Stock effected on February 22, 2000. Capitalized terms herein shall have the meanings assigned to such terms in the attached Appendix. II. ADMINISTRATION OF THE PLAN Each Foreign Subsidiary shall have responsibility to administer the Plan with respect to its Eligible Employees. Accordingly, the Plan shall, as to each Foreign Subsidiary, be separately administered by a committee (the "Plan Administrator") comprised of two (2) or more members of the senior management of that Foreign Subsidiary appointed from time to time by the SanDisk Board. The Plan Administrator for each Foreign Subsidiary shall have full authority to administer the Plan with respect to the Eligible Employees of that Foreign Subsidiary, including authority to interpret and construe any provision of the Plan and to adopt such rules and regulations for administering the Plan as it may deem necessary. Decisions of the Plan Administrator shall be subject to ratification by the SanDisk Board and, when so ratified, shall be final and binding on all parties who have an interest in the Plan. III. STOCK SUBJECT TO PLAN A. The stock purchasable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares of Common Stock purchased on the open market. The maximum number of shares of Common Stock which may be issued in the aggregate over the term of this Plan and the U.S. Plan shall not exceed Two Million Six Hundred Sixty-One Thousand Sixty-Two (2,661,062) shares. Such share reserve includes (i) the initial share reserve of 866,666 shares under the U.S. Plan approved by the stockholders in August 1995, (ii) an additional 900,000 share increase authorized by the Board on February 10, 1997 and approved by the stockholders at the 1997 Annual Meeting, (iii) an additional 600,000 share increase authorized by the Board on December 17, 1998 and approved by the stockholders at the 1999 Annual Meeting and (iv) an additional Two Hundred Ninety-Four Thousand Three Hundred Ninety-Six (294,396) shares added to the reserve pursuant to the automatic share increase effected in January 2002.. In no event shall more than 1,777,306 shares of Common Stock be issued in the aggregate under this Plan and the U.S. Plan after March 15, 1999. B. The number of shares of Common Stock available for issuance under the combined reserve of this Plan and the U.S. Plan shall automatically increase on the first trading day of January each calendar year during the term of the Plan, beginning with calendar year 2002, by an amount equal to forty-three one hundredths of one percent (0.43%) of the shares of Common Stock outstanding on the last trading day in December of the immediately preceding calendar year, but in no event shall any such annual increase exceed 400,000 shares. C. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration, appropriate adjustments shall be made to (i) the maximum number and class of securities issuable in the aggregate under this Plan and the U.S. Plan, (ii) the maximum number and/or class of securities by which the combined share reserve under this Plan and the U.S. Plan is to increase each calendar year pursuant to the provisions of Section III.B, (iii) the maximum number and class of securities purchasable per Participant on any one Purchase Date and (iv) the number and class of securities and the price per share in effect under each outstanding purchase right in order to prevent the dilution or enlargement of benefits thereunder. IV. OFFERING PERIODS A. Shares of Common Stock shall be offered for purchase under the Plan through a series of successive Offering Periods until such time as (i) the maximum number of shares of Common Stock available for issuance under the Plan shall have been purchased or (ii) the Plan shall have been sooner terminated. B. Each Offering Period (other than the Initial Offering Period) shall have a duration of six (6) months. Offering Periods shall run from the first U.S. business day in February to the last U.S. business day in July each year and from the first U.S. business day of August each year to the last U.S. business day in January in the following year. However, the Initial Offering Period shall commence at the Effective Time and terminate on the last U.S. business day in January, 1997. During the Initial Offering Period, there shall be three (3) successive Purchase Intervals: the first shall run from the Effective Time to the last U.S. business day in January 1996; the second shall run from the first U.S. business day in February 1996 to the last U.S. business day in July 1996; and the last shall run from the first U.S. business day in August to the last U.S. business day in January 1997. A Purchase Date shall occur at the end of each Purchase Interval within the Initial Offering Period. However, for each subsequent Offering Period, there shall only be a single Purchase Date coincident with the last U.S. business day of that Offering Period. 2 V. ELIGIBILITY A. Only individuals who are Eligible Employees on the start date of an Offering Period shall be eligible to participate in the Plan for that Offering Period. For the Initial Offering Period, the following special eligibility provisions shall be in effect: - Each individual who is an Eligible Employee at the Effective Time may enter the Initial Offering Period at that time or on the start date of any subsequent Purchase Interval within that Offering Period, provided he or she remains an Eligible Employee on that date. - Each individual who first becomes an Eligible Employee after the Effective Time may enter the Initial Offering Period on the start date of any subsequent Purchase Interval within that Offering Period, provided he or she is an Eligible Employee on that date. B. The date an Eligible Employee enters the Offering Period shall be designated his or her Entry Date. C. To participate in the Plan for a particular Offering Period, the Eligible Employee must complete the enrollment forms prescribed by the Plan Administrator (including a stock purchase agreement and a payroll deduction authorization form) and file such forms with the Plan Administrator (or its designate) on or before his or her scheduled Entry Date. VI. PAYROLL DEDUCTIONS A. The payroll deduction authorized by the Participant for purposes of acquiring shares of Common Stock under the Plan may be any multiple of one percent (1%) of the Earnings paid to the Participant during each Offering Period, up to a maximum of ten percent (10%). The payroll deduction authorized by the Participant shall be collected in the currency in which paid by the Foreign Subsidiary and converted into U.S. Dollars on the first U.S. business day of the month following the month in which collected (the "Monthly Exchange Date") on the basis of the exchange rate in effect on that Monthly Exchange Date. Any payroll deductions not so converted prior to the next scheduled Purchase Date shall be converted in U.S. Dollars on that date on the basis of the exchange rate in effect on such Purchase Date. Any changes or fluctuations in the exchange rate at which the payroll deductions collected on the Participant's behalf are converted into U.S. Dollars on each Monthly Exchange Date or Purchase Date shall be borne solely by the Participant. The rate of payroll deduction authorized by each Participant shall continue in effect from Offering Period to Offering Period, except to the extent such rate is changed in accordance with the following guidelines: (i) The Participant may, at any time during an Offering Period, reduce his or her rate of payroll deduction to become effective as soon as possible after filing the appropriate form with the Plan Administrator. The Participant may not, however, effect more than one (1) such reduction per Offering Period or Purchase Interval. 3 (ii) The Participant may, prior to the start of any new Offering Period or the start of any new Purchase Interval within the Initial Offering Period, increase the rate of his or her payroll deduction by filing the appropriate form with the Plan Administrator. The new rate (which may not exceed the ten percent (10%) maximum) shall become effective as of the start date of the first Offering Period or Purchase Interval following the filing of such form. B. Payroll deductions shall begin on the first pay day following the Participant's Entry Date into the Offering Period and shall (unless sooner terminated by the Participant) continue through the pay day ending with or immediately prior to the last day of that Offering Period. The amounts so collected shall be credited to the Participant's book account under the Plan, initially in the currency in which paid by the Foreign Subsidiary until converted into U.S. Dollars on the applicable Monthly Exchange Date or Purchase Date. Accordingly, all purchases of Common Stock under the Plan are to be made with the U.S. Dollars into which the payroll deductions for the Offering Period or Purchase Interval have been converted on each applicable Monthly Exchange Date and Purchase Date within that Offering Period or Purchase Interval. No interest shall be paid on the balance from time to time outstanding in the book account maintained for the Participant, and the amounts collected from the Participant shall not be held in any segregated account or trust fund and may be commingled with the general assets of the Corporation or the Foreign Subsidiary and used for general corporate purposes. C. Payroll deductions shall automatically cease upon the termination of the Participant's purchase right in accordance with the provisions of the Plan. D. The Participant's acquisition of Common Stock under the Plan on any Purchase Date shall neither limit nor require the Participant's acquisition of Common Stock on any subsequent Purchase Date. VII. PURCHASE RIGHTS A. Grant of Purchase Right. A Participant shall be granted a separate purchase right for each Offering Period in which he or she participates. The purchase right shall be granted on the Participant's Entry Date into the OfferinPageg Period and shall provide the Participant with the right to purchase shares of Common Stock upon the terms set forth below. The Participant shall execute a stock purchase agreement embodying such terms and such other provisions (not inconsistent with the Plan) as the Plan Administrator may deem advisable. B. Exercise of the Purchase Right. The purchase right shall be automatically exercised on each Purchase Date within the Offering Period, and shares of Common Stock shall accordingly be purchased on behalf of the Participant (other than any Participant whose payroll deductions have previously been refunded in accordance with the Termination of Purchase Right provisions below) on such Purchase Date. The purchase shall be effected as follows: first, each Participant's payroll deductions for the Offering Period or Purchase Interval ending on that Purchase Date which have not yet been converted into U.S. Dollars shall be converted from the currency in which paid by the Foreign Subsidiary into U.S. Dollars at the exchange rate in effect on such Purchase Date, and then the amount of U.S. Dollars calculated for each Participant on 4 the basis of such exchange rate shall be added to the amounts previously converted into U.S. Dollars on the Participant's behalf on the applicable Monthly Exchange Dates within that Offering Period or Purchase Interval, and the total U.S. Dollar amount shall be applied to the purchase of whole shares of Common Stock at the purchase price in effect for the Participant for that Purchase Date. All shares purchased on Participant's behalf shall be directly deposited into an account maintained for such Participant at a Corporation-designated brokerage firm. C. Purchase Price. The U.S. Dollar purchase price per share at which Common Stock shall be purchased on the Participant's behalf on each Purchase Date within the Offering Period shall be equal to eighty-five percent (85%) of the lower of (i) the Fair Market Value per share of Common Stock on the Participant's Entry Date into that Offering Period or 5 (ii) the Fair Market Value per share of Common Stock on that Purchase Date. However, for each Participant who joins the Initial Offering Period after the start date, the clause (i) amount shall in no event be less than the Fair Market Value per share of Common Stock on the start date of the Initial Offering Period. D. Number of Purchasable Shares. The number of shares of Common Stock purchasable by a Participant on each Purchase Date shall be determined as follows: first, the Participant's payroll deductions for the Offering Period or Purchase Interval ending on that Purchase Date which have not yet been converted into U.S. Dollars shall be converted from the currency in which paid by the Foreign Subsidiary into U.S. Dollars on the basis of the exchange rate in effect on such Purchase Date, and then the amount of U.S. Dollars calculated for the Participant on the basis of such exchange rate shall be added to the amounts previously converted into U.S. Dollars on the Participant's behalf on the applicable Monthly Exchange Dates within that Offering Period or Purchase Interval, and the total U.S. Dollar amount so determined shall be divided by the U.S. Dollar purchase price in effect for the Participant for that Purchase Date to determine the number of whole shares of Common Stock purchasable on the Participant's behalf. However, the maximum number of shares of Common Stock purchasable per Participant on any one Purchase Date shall not exceed One Thousand Five Hundred (1,500) shares, subject to periodic adjustments in the event of certain changes in the Corporation's capitalization. However, the Plan Administrator shall have the discretionary authority, exercisable prior to the start of any Offering Period, to increase or decrease the limitation to be in effect for the number of shares purchasable per Participant on the Purchase Date for that Offering Period. E. Excess Payroll Deductions. Any payroll deductions not applied to the purchase of shares of Common Stock on any Purchase Date because they are not sufficient to purchase a whole share of Common Stock shall be held for the purchase of Common Stock on the next Purchase Date. However, any payroll deductions not applied to the purchase of Common Stock by reason of the limitation on the maximum number of shares purchasable by the Participant on the Purchase Date shall be promptly refunded in the currency in which paid by the Foreign Subsidiary. F. Termination of Purchase Right. The following provisions shall govern the termination of outstanding purchase rights: (i) A Participant may, at any time prior to the next scheduled Purchase Date, terminate his or her outstanding purchase right by filing the appropriate form with the Plan Administrator (or its designate), and no further payroll deductions shall be collected from the Participant with respect to the terminated purchase right. Any payroll deductions collected during the Offering Period or Purchase Interval in which such termination occurs shall, at the Participant's election, be immediately refunded in the currency in which paid by the Foreign Subsidiary or held for the purchase of shares on the next scheduled Purchase Date. If no such election is made at the time such purchase right is terminated, then the payroll deductions collected with respect to the terminated right shall be refunded as soon as possible. 6 (ii) The termination of such purchase right shall be irrevocable, and the Participant may not subsequently rejoin the Offering Period for which the terminated purchase right was granted. In order to resume participation in any subsequent Offering Period, such individual must re-enroll in the Plan (by making a timely filing of the prescribed enrollment forms) on or before the start date of that Offering Period. (iii) Should the Participant cease to remain an Eligible Employee for any reason (including death, disability or change in status) while his or her purchase right remains outstanding, then that purchase right shall immediately terminate, and all of the Participant's payroll deductions for the Offering Period or Purchase Interval in which the purchase right so terminates shall be immediately refunded in the currency in which paid by the Foreign Subsidiary. However, should the Participant cease to remain in active service by reason of an approved unpaid leave of absence, then the Participant shall have the election, exercisable up until the last day of the Offering Period or Purchase Interval in which such leave commences, to (a) withdraw all the payroll deductions collected to date on his or her behalf for such Offering Period or Purchase Interval, with the withdrawn funds to be paid in the same currency in which paid by the Foreign Subsidiary, (b) have such funds held for the purchase of shares on the next scheduled Purchase Date. In no event, however, shall any further payroll deductions be collected on the Participant's behalf during such leave. Upon the Participant's return to active service (x) within ninety (90) days following the commencement of such leave or (y) prior to the expiration of any longer period for which such Participant's right to reemployment with the Foreign Subsidiary is guaranteed by either statute or contract, his or her payroll deductions under the Plan shall automatically resume at the rate in effect at the time the leave began, unless the Participant withdraws from the Plan prior to his or her return. An individual who returns to active employment following a leave of absence which exceeds in duration the applicable (x) or (y) time period will be treated as a new Employee for purposes of subsequent participation in the Plan and must accordingly re-enroll in the Plan (by making a timely filing of the prescribed enrollment forms) on or before the start date of any new Offering Period or Purchase Interval. G. Corporate Transaction. Each outstanding purchase right shall automatically be exercised, immediately prior to the effective date of any Corporate Transaction, by applying the payroll deductions of each Participant, as converted into U.S. Dollars on the applicable Monthly Exchange Dates, to the purchase of whole shares of Common Stock at a purchase price per share equal to eighty-five percent (85%) of the lower of (i) the Fair Market Value per share of Common Stock on the Participant's Entry Date into the Offering Period in which such Corporate Transaction occurs or (ii) the Fair Market Value per share of Common Stock immediately prior to the effective date of such Corporate Transaction. Payroll deductions not yet converted into U.S. Dollars at the time of the Corporate Transaction shall be converted from the currency in which paid by the Foreign Subsidiary into U.S. Dollars on the basis of the exchange rate in effect at the time of the Corporate Transaction, and the applicable limitation on the number of shares of Common Stock purchasable per Participant shall continue to apply to each purchase. Should the Corporation sell or otherwise dispose of its ownership interest in any Foreign Subsidiary participating in the Plan, 7 whether through merger or sale of all or substantially all of the assets or outstanding capital stock of that Foreign Subsidiary, then a similar exercise of outstanding purchase rights shall be effected immediately prior to the effective date of such disposition, but only to the extent those purchase rights are attributable to the employees of such Foreign Subsidiary. The Corporation shall use its best efforts to provide at least ten (10)-days prior written notice of the occurrence of any Corporate Transaction, and Participants shall, following the receipt of such notice, have the right to terminate their outstanding purchase rights prior to the effective date of the Corporate Transaction. H. Proration of Purchase Rights. Should the total number of shares of Common Stock to be purchased pursuant to outstanding purchase rights on any particular date exceed the number of shares then available for issuance under the Plan, then the SanDisk Board shall make a pro-rata allocation of the available shares on a uniform and nondiscriminatory basis, and the payroll deductions of each Participant, to the extent in excess of the aggregate purchase price payable for the Common Stock pro-rated to such individual, shall be refunded in the currency in which paid by the Foreign Subsidiary. I. Assignability. During the Participant's lifetime, the purchase right shall be exercisable only by the Participant and shall not be assignable or transferable. J. Stockholder Rights. A Participant shall have no stockholder rights with respect to the shares subject to his or her outstanding purchase right until the shares are purchased on the Participant's behalf in accordance with the provisions of the Plan and the Participant has become a holder of record of the purchased shares. VIII. ACCRUAL LIMITATIONS A. No Participant shall be entitled to accrue rights to acquire Common Stock pursuant to any purchase right outstanding under this Plan if and to the extent such accrual, when aggregated with (i) rights to purchase Common Stock accrued under any other purchase right granted under this Plan and (ii) similar rights accrued under other employee stock purchase plans (within the meaning of Code Section 423) of the Corporation or any Foreign Subsidiary or other Corporate Affiliate, would otherwise permit such Participant to purchase more than Twenty-Five Thousand U.S. Dollars (US $25,000) worth of stock of the Corporation or any Foreign Subsidiary or other Corporate Affiliate (determined on the basis of the Fair Market Value of such stock on the date or dates such rights are granted) for each calendar year such rights are at any time outstanding. B. For purposes of applying such accrual limitations to the purchase rights granted under this Plan, the following provisions shall be in effect: (i) The right to acquire Common Stock under each outstanding purchase right shall accrue in one or more installments on each Purchase Date within the Offering Period for which such right is granted. 8 (ii) No right to acquire Common Stock under any outstanding purchase right shall accrue to the extent the Participant has already accrued in the same calendar year the right to acquire Common Stock under one (1) or more other purchase rights at a rate equal to Twenty-Five Thousand U.S. Dollars (US $25,000) worth of Common Stock (determined on the basis of the Fair Market Value of such stock on the date or dates of grant) for each calendar year such rights were at any time outstanding. C. If by reason of such accrual limitations, the purchase right of a Participant does not accrue for a particular Offering Period (or a particular Purchase Interval within the Initial Offering Period), then the payroll deductions which the Participant made during that Offering Period (or Purchase Interval) with respect to such unaccrued purchase right shall be promptly refunded in the currency in which paid by the Foreign Subsidiary. D. In the event there is any conflict between the provisions of this Article and one or more provisions of the Plan or any instrument issued thereunder, the provisions of this Article shall be controlling. IX. EFFECTIVE DATE AND TERM OF THE PLAN A. The Plan was adopted by the SanDisk Board on July 25, 1995 and shall become effective at the Effective Time, provided no purchase rights granted under the Plan shall be exercised, and no shares of Common Stock shall be issued hereunder, until (i) the Plan shall have been approved by the stockholders of the Corporation and (ii) the Corporation shall have complied with all applicable requirements of the 1933 Act (including the registration of the shares of Common Stock issuable under the Plan on a Form S-8 registration statement filed with the Securities and Exchange Commission), all applicable listing requirements of any stock exchange (or the Nasdaq National Market, if applicable) on which the Common Stock is listed for trading and all other applicable requirements established by law or regulation. In the event such stockholder approval is not obtained, or such compliance is not effected, within twelve (12) months after the date on which the Plan is adopted by the SanDisk Board, the Plan shall terminate and have no further force or effect and all sums collected from Participants during the Initial Offering Period shall be refunded in the currency in which paid by the Foreign Subsidiaries. B. On February 10, 1997, the Board adopted an amendment to the share reserve of this Plan and the U.S. Plan to increase the number of shares of Common Stock authorized for issuance under this Plan and the U.S. Plan by an additional 900,000 shares in the aggregate. This amendment was approved by the stockholders at the 1997 Annual Meeting. C. On December 17, 1998, the Board adopted amendments to the Plan to (i) increase the number of shares of Common Stock authorized for issuance in the aggregate under this Plan and the U.S. Plan by an additional 600,000 shares and (ii) to implement the automatic share increase provisions of Section III.B. These amendments were approved by the stockholders at the 1999 Annual Meeting. 9 D. Unless sooner terminated by the SanDisk Board, the Plan shall terminate upon the earliest of (i) the last U.S. business day in July 2005, (ii) the date on which all shares available for issuance under the Plan shall have been sold pursuant to purchase rights exercised under the Plan or (iii) the date on which all purchase rights are exercised in connection with a Corporate Transaction. No further purchase rights shall be granted or exercised, and no further payroll deductions shall be collected, under the Plan following such termination. X. AMENDMENT OF THE PLAN The SanDisk Board may alter, amend, suspend or discontinue the Plan with respect to one or more Participating Companies at any time to become effective immediately following the close of any Offering Period or Purchase Interval. The SanDisk Board may also terminate the Plan in its entirety immediately following the end of any Offering Period. In such event, no further purchase rights shall thereafter be granted or exercised, and no further payroll deductions shall thereafter be collected, under the Plan. XI. GENERAL PROVISIONS A. All costs and expenses incurred in the administration of the Plan shall be paid by the Corporation or the Foreign Subsidiary. B. Nothing in the Plan shall confer upon the Participant any right to continue in the employ of the Corporation or any Foreign Subsidiary or other Corporate Affiliate for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Foreign Subsidiary or other Corporate Affiliate employing such person) or of the Participant, which rights are hereby expressly reserved by each, to terminate such person's employment at any time for any reason, with or without cause. 10 Schedule A Corporations Participating in International Employee Stock Purchase Plan As of January 2, 2002 SanDisk International Sales, Inc. SanDisk, Limited (Japan) SanDisk Gmbh (Germany) SanDisk Israel Ltd. SanDisk Hong Kong Ltd. SanDisk Sweden AB SanDisk Taiwan APPENDIX The following definitions shall be in effect under the Plan: A. Code shall mean the Internal Revenue Code of 1986, as amended. B. Common Stock shall mean the Corporation's common stock. C. Corporate Affiliate shall mean any parent or subsidiary corporation of the Corporation (as determined in accordance with Code Section 424), whether now existing or subsequently established. D. Corporate Transaction shall mean either of the following stockholder-approved transactions to which the Corporation is a party: (i) a merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction, or (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Corporation in complete liquidation or dissolution of the Corporation. E. Corporation shall mean SanDisk Corporation, a Delaware corporation, and any corporate successor to all or substantially all of the assets or voting stock of SanDisk Corporation which shall by appropriate action adopt the Plan. F. Earnings shall mean regular base salary plus such additional items of compensation as the Plan Administrator may deem appropriate. G. Effective Time shall mean November 7, 1995, the time at which the Underwriting Agreement was executed and finally priced. Any Corporate Affiliate which becomes a Foreign Subsidiary after such Effective Time shall designate a subsequent Effective Time with respect to its employee-Participants. H. Eligible Employee shall mean any non-U.S. citizen who is employed by a Foreign Subsidiary on a basis under which he or she is regularly expected to render more than twenty (20) hours of service per week outside the U.S. for more than five (5) months per calendar year. I. Entry Date shall mean the date an Eligible Employee first commences participation in the Offering Period in effect under the Plan. The earliest Entry Date under the Plan shall be the Effective Time. A-1 J. Fair Market Value per share of Common Stock on any relevant date shall be determined in accordance with the following provisions: (i) If the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question, as such price is reported by the National Association of Securities Dealers on the Nasdaq National Market or any successor system. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. (ii) If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the Stock Exchange serving as the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. K. Foreign Subsidiary shall mean any non-U.S. Corporate Affiliate which elects, with the approval of the SanDisk Board, to extend the benefits of this Plan to its Eligible Employees. As of the Effective Date, the Foreign Subsidiaries participating in the Plan are listed on attached Schedule A. L. Initial Offering Period shall mean the first Offering Period in effect under the Plan which began at the Effective Time and ended on the last U.S. business day in January 1997. M. 1933 Act shall mean the Securities Act of 1933, as amended. N. Monthly Exchange Date shall mean the first U.S. business day of each month during an Offering Period or Purchase Interval on which the foreign currency payroll deductions collected on behalf of the Participants for the preceding month are to be converted into U.S. Dollars. O. Offering Period shall mean each successive period during which payroll deductions are to be collected on the behalf of Participants and applied to the purchase of Common Stock on one or more Purchase Dates within that period. P. Participant shall mean any Eligible Employee of a Foreign Subsidiary who is actively participating in the Plan. Q. Plan shall mean the Corporation's International Employee Stock Purchase Plan, as set forth in this document. A-2 R. Plan Administrator shall mean the committee of two (2) or more members of the senior management of the Foreign Subsidiary appointed by the SanDisk Board to administer the Plan for that Foreign Subsidiary. S. Purchase Date shall mean the last U.S. business day of January and July each year on which shares of Common Stock shall be purchased on behalf of each Participant. T. Purchase Interval shall mean each of three (3) successive periods within the Initial Offering Period at the end of which there shall be purchased shares of Common Stock on behalf of each Participant. The first Purchase Interval shall begin at the Effective Time and end on the last U.S. business day in January 1996; the second Purchase Interval shall begin on the first U.S. business day in February 1996 and end on the last U.S. business day in July 1996; and the final Purchase Interval shall begin on the first U.S. business day in August 1996 and end on the last U.S. business day in January 1997. U. SanDisk Board shall mean the Corporation's SanDisk Board of Directors. V. Stock Exchange shall mean either the American Stock Exchange or the New York Stock Exchange. W. Underwriting Agreement shall mean the agreement between the Corporation and the underwriter or underwriters which managed the initial public offering of the Common Stock. X. U.S. Plan shall mean the Corporation's Employee Stock Purchase Plan. A-3 EX-99.4 8 dex994.txt SANDISK CORPORATION 1995 NON-EMPLOYEE DIRECTORS Exhibit 99.4 SANDISK CORPORATION 1995 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN AMENDED AND RESTATED JANUARY 2, 2002 ARTICLE ONE GENERAL PROVISIONS I. PURPOSE OF THE PLAN This 1995 Non-Employee Directors Stock Option Plan is intended to promote the interests of SanDisk Corporation, a Delaware corporation, by providing the non-employee members of the Board with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in the service of the Corporation. Capitalized terms shall have the meanings assigned to such terms in the attached Appendix. All share numbers in this document reflect the 2-for-1 split of the Common Stock effected on February 22, 2000. II. ADMINISTRATION OF THE PLAN The terms of each option grant (including the timing and pricing of the option grant) shall be determined by the express terms of the Plan, and neither the Board nor any committee of the Board shall exercise any discretionary functions with respect to option grants made pursuant to the Plan. III. ELIGIBILITY The individuals eligible to receive option grants under the Plan shall be (i) those individuals who are serving as non-employee Board members on the Effective Date or who are first elected or appointed as non-employee Board members on or after such date, whether through appointment by the Board or election by the Corporation's stockholders, and (ii) those individuals who continue to serve as non-employee Board members after one or more Annual Stockholders Meetings beginning with the 1996 Annual Meeting. A non-employee Board member who has previously been in the employ of the Corporation (or any Parent or Subsidiary) shall not be eligible to receive an option grant under the Plan on the Effective Date or at the time he or she first becomes a non-employee Board member, but shall be eligible to receive periodic option grants under the Plan upon his or her continued service as a non-employee Board member following one or more Annual Stockholders Meetings. IV. STOCK SUBJECT TO THE PLAN A. The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Corporation on the open market. The maximum number of shares of Common Stock which may be issued over the term of the Plan shall not exceed 800,000 shares. Such share reserve includes (i) the initial share reserve of 300,000 shares approved by the stockholders in August 1995, (ii) an additional 100,000 share increase authorized by the Board on February 10, 1997 and approved by the stockholders at the 1997 Annual Stockholders Meeting, (iii) an additional 400,000 share increase authorized by the Board on December 17, 1998, and approved by the stockholders at the 1999 Annual Meeting and (iv) an additional increase of 136,928 shares effected in January 2002 pursuant to the automatic share increase provisions of Section IV.B. B. The number of shares of Common Stock available for issuance under the Plan shall automatically increase on the first trading day of January each calendar year during the term of the Plan, beginning with calendar year 2002, by an amount equal to two tenths of one percent (0.2%) of the shares of Common Stock outstanding on the last trading day in December of the immediately preceding calendar year, but in no event shall any such annual increase exceed 150,000 shares. C. Shares of Common Stock subject to outstanding options shall be available for subsequent issuance under the Plan to the extent the options expire or terminate for any reason prior to exercise in full. In addition, unvested shares issued under the Plan and subsequently repurchased by the Corporation, at the original exercise price paid per share, pursuant to the Corporation's repurchase rights under the Plan shall be added back to the number of shares of Common Stock reserved for issuance under the Plan and shall accordingly be available for reissuance through one or more subsequent option grants under the Plan. However, shares subject to any option or portion thereof surrendered in accordance with Article Two shall reduce on a share-for-share basis the number of shares of Common Stock available for subsequent issuance under the Plan. Should the exercise price of an option under the Plan be paid with shares of Common Stock, then the number of shares of Common Stock available for issuance under the Plan shall be reduced by the gross number of shares for which the option is exercised, and not by the net number of shares of Common Stock issued to the holder of such option. D. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration, appropriate adjustments shall be made to (i) the maximum number and/or class of securities issuable under the Plan, (ii) the maximum number and/or class of securities by which the share reserve is to increase each calendar year pursuant to the provisions of Section IV.B of this Article One, (iii) the number and/or class of securities for which option grants are to be subsequently made per Eligible Director and (iv) the number and/or class of securities and the exercise price per share in effect under each outstanding option in order to prevent the dilution or enlargement of benefits thereunder. The adjustments to the outstanding options shall be made by the Board and shall be final, binding and conclusive. 2 ARTICLE TWO OPTION GRANT PROGRAM I. OPTION TERMS The provisions of this Article Two reflect the changes to the number of shares of Common Stock subject to the initial and annual option grants to be made to the non-employee Board members pursuant to the amendment authorized by the Board on December 17, 1998, and approved by the stockholders at the 1999 Annual Meeting. Stockholder approval of such amendment shall constitute pre-approval of each option grant made on or after the date of the 1999 Annual Meeting to the non-employee Board members pursuant to the amended provisions of this Article Two and the subsequent exercise of that option in accordance with such provisions. A. Grant Dates. Option grants shall be made on the dates specified below: 1. Each Eligible Director who is first elected or appointed as a non-employee Board member on or after the date of the 1999 Annual Stockholders Meeting shall automatically be granted, on the date of such initial election or appointment (as the case may be), a Non-Statutory Option to purchase 64,000 shares of Common Stock. 2. On the date of each Annual Stockholders Meeting, beginning with the 1999 Annual Meeting, each individual who is to continue to serve as an Eligible Director shall automatically be granted, whether or not such individual is standing for re-election as a Board member at that Annual Meeting, a Non-Statutory Option to purchase an additional 16,000 shares of Common Stock, provided such individual has served as a non-employee Board member for at least six (6) months prior to the date of such Annual Meeting. There shall be no limit on the number of such 16,000-share option grants any one Eligible Director may receive over his or her period of Board service. B. Exercise Price. 1. The exercise price per share shall be equal to one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date. 2. The exercise price shall become immediately due upon exercise of the option and shall be payable in one or more of the forms specified below: (i) cash or check made payable to the Corporation, (ii) shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date, or 3 (iii) to the extent the option is exercised for vested shares, through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide irrevocable written instructions to (A) a Corporation-designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable Federal, state and local income and employment taxes required to be withheld by the Corporation by reason of such exercise and (B) the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale. Except to the extent such sale and remittance procedure is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. C. Option Term. Each option shall have a term of ten (10) years measured from the option grant date. D. Exercise and Vesting of Options. Each option shall be immediately exercisable for any or all of the option shares. However, any shares purchased under the option shall be subject to repurchase by the Corporation, at the exercise price paid per share, upon the Optionee's cessation of Board service prior to vesting in those shares. Each initial grant shall vest, and the Corporation's repurchase right shall lapse, in a series of four (4) equal and successive annual installments over the Optionee's period of continued service as a Board member, with the first such installment to vest upon the Optionee's completion of one (1) year of Board service measured from the option grant date. Each annual grant shall vest, and the Corporation's repurchase right shall lapse, upon the Optionee's completion of one (1) year of Board service measured from the option grant date. E. Effect of Termination of Board Service. The following provisions shall govern the exercise of any options held by the Optionee at the time the Optionee ceases to serve as a Board member: (i) The Optionee (or, in the event of Optionee's death, the personal representative of the Optionee's estate or the person or persons to whom the option is transferred pursuant to the Optionee's will or in accordance with the laws of descent and distribution) shall have a twelve (12)-month period following the date of such cessation of Board service in which to exercise each such option. (ii) During the twelve (12)-month exercise period, the option may not be exercised in the aggregate for more than the number of vested shares for which the option is exercisable at the time of the Optionee's cessation of Board service. (iii) Should the Optionee cease to serve as a Board member by reason of death or Permanent Disability, then all shares at the time subject to the option shall immediately vest so that such option may, during the twelve (12)-month exercise period following such cessation of Board service, be exercised for all or any portion of such shares as fully-vested shares. 4 (iv) In no event shall the option remain exercisable after the expiration of the option term. Upon the expiration of the twelve (12)-month exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon the Optionee's cessation of Board service, terminate and cease to be outstanding to the extent it is not exercisable for vested shares on the date of such cessation of Board service. F. Stockholder Rights. The holder of an option shall have no stockholder rights with respect to the shares subject to the option until such person shall have exercised the option, paid the exercise price and become a holder of record of the purchased shares. G. Limited Transferability of Options. An automatic option granted under the Plan may, in connection with the Optionee's estate plan, be assigned in whole or in part during the Optionee's lifetime to one or more members of the Optionee's immediate family or to a trust established exclusively for one or more such family members. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate. II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER A. In the event of any Corporate Transaction, the shares of Common Stock at the time subject to each outstanding option but not otherwise vested shall automatically vest in full so that each such option shall, immediately prior to the specified effective date of the Corporate Transaction, become fully exercisable for all of the shares of Common Stock at the time subject to such option and may be exercised for all or any portion of such shares as fully-vested shares of Common Stock. Immediately following the consummation of the Corporate Transaction, each option grant shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof). B. In connection with any Change in Control, the shares of Common Stock at the time subject to each outstanding option but not otherwise vested shall automatically vest in full so that each such option shall, immediately prior to the effective date of the Change in Control, become fully exercisable for all of the shares of Common Stock at the time subject to such option and may be exercised for all or any portion of such shares as fully-vested shares of Common Stock. Each such option shall remain exercisable for such fully-vested option shares until the expiration of the option term or the surrender of the option in connection with a Hostile Take-Over. C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have a thirty (30)-day period in which to surrender to the Corporation each option held by him or her. The Optionee shall in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Take-Over Price of the shares of Common Stock at the time subject 5 to the surrendered option (whether or not the Optionee is otherwise at the time vested in those shares) over (ii) the aggregate exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following the surrender of the option to the Corporation. Stockholder approval of the December 17, 1998 amendment and restatement of the Plan shall constitute pre-approval of each option surrender right subsequently granted under the Plan and the subsequent exercise of that right in accordance with the terms and provisions of this Section II.C. No additional approval of the Board or any committee of the Board shall be required at the time of the actual option surrender and cash distribution. D. The grant of options under the Plan shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 6 ARTICLE THREE MISCELLANEOUS I. EFFECTIVE DATE AND TERM OF THE PLAN A. The Plan became effective on the November 7, 1995 Effective Date after adoption by the Board on July 25, 1995 and approval by the Corporation's stockholders in August 1995. B. The Plan was amended on February 10, 1997 (the "February 1997 Amendment") to effect the following changes: (i) increase the number of shares of Common Stock authorized for issuance over the term of the Plan by an additional 100,000 shares, (ii) allow unvested shares issued under the Plan and subsequently repurchased by the Corporation at the option exercise price paid per share to be reissued under the Plan and (iii) effect a series of technical changes to the provisions of the Plan (including stockholder approval requirements) in order to take advantage of the recent amendments to Rule 16b-3 of the Securities Exchange Act of 1934 which exempts certain officer and director transactions under the Plan from the short-swing liability provisions of the Federal securities laws. The February 1997 Amendment was approved by the stockholders at the 1997 Annual Meeting. The Plan was amended on December 17, 1998 (the "December 1998 Amendment") to effect the following changes: (i) increase the number of shares of Common Stock authorized for issuance over the term of the Plan by an additional 400,000 shares, (ii) implement the automatic share increase provisions of Section IV.B of Article One, (iii) increase the size of the initial grants to non-employee Board members from 32,000 to 64,000 shares of Common Stock and (iv) increase the size of the annual grants to non-employee Board members from 8,000 to 16,000 shares of Common Stock. The December 1998 Amendment was approved by the stockholders at the 1999 Annual Meeting. All option grants made prior to the December 1998 Amendment shall remain outstanding in accordance with the terms and conditions of the respective instruments evidencing those options or issuances, and nothing in the December 1998 Amendment shall be deemed to modify or in any way affect those outstanding options or issuances. Subject to the foregoing limitations, options may be granted under the Plan at any time before the date fixed herein for the termination of the Plan. C. The Plan shall terminate upon the earliest of (i) July 24, 2005, (ii) the date on which all shares available for issuance under the Plan shall have been issued or cancelled pursuant to the exercise or cash-out of the options under the Plan or (iii) the termination of all outstanding options in connection with a Corporate Transaction. Upon such Plan termination, all 7 option grants and unvested stock issuances outstanding on such date shall thereafter continue to have force and effect in accordance with the provisions of the documents evidencing such grants or issuances. II. AMENDMENT OF THE PLAN The Board shall have complete and exclusive power and authority to amend or modify the Plan in any or all respects. However, no such amendment or modification shall adversely affect the rights and obligations with respect to options or unvested stock issuances at the time outstanding under the Plan unless the Optionee consents to such amendment or modification. In addition, certain amendments may require stockholder approval pursuant to applicable laws or regulations. III. USE OF PROCEEDS Any cash proceeds received by the Corporation from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes. IV. REGULATORY APPROVALS A. The implementation of the Plan, the granting of any option under the Plan and the issuance of any shares of Common Stock upon the exercise of any option shall be subject to the Corporation's procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the options granted under it and the shares of Common Stock issued pursuant to it. B. No shares of Common Stock or other assets shall be issued or delivered under the Plan unless and until there shall have been compliance with all applicable requirements of Federal and state securities laws, including the filing and effectiveness of the Form S-8 registration statement for the shares of Common Stock issuable under the Plan, and all applicable listing requirements of any stock exchange (or the Nasdaq National Market, if applicable) on which Common Stock is then listed for trading. V. NO EMPLOYMENT/SERVICE RIGHTS Nothing in the Plan shall confer upon the Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary employing or retaining such person) and the Corporation's stockholders or of the Optionee, which rights are hereby expressly reserved by each, to terminate such person's Service at any time for any reason, with or without cause. 8 APPENDIX The following definitions shall be in effect under the Plan: A. Board shall mean the Corporation's Board of Directors. B. Change in Control shall mean a change in ownership or control of the Corporation effected through either of the following transactions: (i) the acquisition, directly or indirectly by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities pursuant to a tender or exchange offer made directly to the Corporation's stockholders; or (ii) a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time such election or nomination was approved by the Board. C. Code shall mean the Internal Revenue Code of 1986, as amended. D. Common Stock shall mean the Corporation's common stock. E. Corporate Transaction shall mean either of the following stockholder-approved transactions to which the Corporation is a party: (i) a merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities are transferred to a person or persons different from the persons holding those immediately prior to such transaction; or (ii) the sale, transfer or other disposition of all or substantially all of the Corporation's assets in complete liquidation or dissolution of the Corporation. F. Corporation shall mean SanDisk Corporation, a Delaware corporation. G. Effective Date shall mean November 7, 1995, the date on which the Underwriting Agreement was executed and the initial public offering price of the Common Stock was established. A-1 H. Eligible Director shall mean a non-employee Board member eligible to participate in the Plan. I. Exercise Date shall mean the date on which the Corporation shall have received written notice of the option exercise. J. Fair Market Value per share of Common Stock on any relevant date shall be determined in accordance with the following provisions: (i) If the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question, as such price is reported by the National Association of Securities Dealers on the Nasdaq National Market or any successor system. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. (ii) If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the Stock Exchange which serves as the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. K. Hostile Take-Over shall mean a change in ownership of the Corporation through the direct or indirect acquisition by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities pursuant to a tender or exchange offer made directly to the Corporation's stockholders which the Board does not recommend such stockholders to accept. L. 1934 Act shall mean the Securities Exchange Act of 1934, as amended. M. Non-Statutory Option shall mean an option not intended to satisfy the requirements of Code Section 422. N. Optionee shall mean any person to whom an option is granted under the Plan. O. Parent shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A-2 P. Permanent Disability shall mean the inability of the Optionee to perform his or her usual duties as a Board member by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more. Q. Plan shall mean the Corporation's 1995 Non-Employee Directors Stock Option Plan, as set forth in this document. R. Section 16 Insiders shall mean an officer or director of the Corporation subject to the short-swing profit liabilities of Section 16 of the 1934 Act. S. Stock Exchange shall mean either the American Stock Exchange or the New York Stock Exchange. T. Subsidiary shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. U. Take-Over Price shall mean the greater of (i) the Fair Market Value per share of Common Stock on the date the option is surrendered to the Corporation in connection with a Hostile Take-Over or (ii) the highest reported price per share of Common Stock paid by the tender offeror in effecting such Hostile Take-Over. V. Underwriting Agreement shall mean the agreement between the Corporation and the underwriter or underwriters which managed the initial public offering of the Common Stock. 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