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                                                                    EXHIBIT 10.2

                               LEXAR MEDIA, INC.
                     1996 STOCK OPTION/STOCK ISSUANCE PLAN
                     -------------------------------------
    (As Adopted December 18, 1996 and Amended May 9, 1997, October 30, 1998,
                    September 15, 1999 and December 8, 1999)

                                  ARTICLE ONE

                               GENERAL PROVISIONS
                               ------------------

     I.   PURPOSE OF THE PLAN

          This 1996 Stock Option/Stock Issuance Plan is intended to promote the
interests of Lexar Media, Inc., a California 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 herein shall have the meanings assigned to such
terms in the attached Appendix.

     II.  STRUCTURE OF THE PLAN

          A.  The Plan shall be divided into two (2) separate equity programs:

              (i)  the Option Grant Program under which eligible persons may,
     at the discretion of the Plan Administrator, be granted options to purchase
     shares of Common Stock, and

              (ii) the Stock Issuance Program under which eligible persons may,
     at the discretion of the Plan Administrator, be issued shares of Common
     Stock directly, either through the immediate purchase of such shares or as
     a bonus for services rendered the Corporation (or any Parent or
     Subsidiary).

          B.  The provisions of Articles One and Four shall apply to both equity
programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.

     III. ADMINISTRATION OF THE PLAN

          A.  The Plan shall be administered by the Board. However, any or all
administrative functions otherwise exercisable by the Board may be delegated to
the Committee. Members of the Committee shall serve for such period of time as
the Board may determine and shall be subject to removal by the Board at any
time. The Board may also at any time terminate the functions of the Committee
and reassume all powers and authority previously delegated to the Committee.

          B.  The Plan Administrator shall 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
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interpretations of, the Plan and any outstanding options or stock issuances
thereunder as it may deem necessary or advisable. Decisions of the Pan
Administrator shall be final and binding on all parties who have an interest in
the Plan or any option or stock issuance thereunder.

     IV.  ELIGIBILITY

          A.   The persons eligible to participate in the Plan are as follows:

               (i)   Employees,

               (ii)  non-employee members of the Board or the non-employee
     members of the board of directors of any Parent or Subsidiary, and

               (iii) consultants and other independent advisors who provide
     services to the Corporation (or any Parent or Subsidiary).

          B.  The Plan Administrator shall have full authority to determine, (i)
with respect to the option grants under the Option Grant Program, 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 options as either an Incentive Option or a Non-Statutory
Option, the time or times at which each option is to become exercisable, the
vesting schedule (if any) applicable to the option shares and the maximum term
for which the option is to remain outstanding, and (ii) with respect to stock
issuances under the Stock Issuance Program, which eligible persons are to
receive stock issuances, the time or times when such issuances are to be made,
the number of shares to be issued to each Participant, the vesting schedule (if
any) applicable to the issued shares and the consideration to be paid by the
Participant for such shares.

          C.  The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Option Grant Program or to effect stock
issuances in accordance with the Stock Issuance Program.

     V.   STOCK SUBJECT TO THE PLAN

          A.  The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock.  The maximum number of shares of Common
Stock which may be issued over the term of the Plan shall not exceed Thirteen
Million Thirty-Eight Thousand Eighty-Two (13,038,082) shares.

          B.  Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
expire or terminate for any reasons prior to exercise in full or (ii) the
options are cancelled in accordance with the cancellation-regrant provisions of
Article Two.  Unvested shares issued under the Plan and subsequently repurchased
by the Corporation, at the option 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 Pan and shall
accordingly be available for reissuance through one or more subsequent option
grants or direct stock issuances under the Plan.

                                       2
<PAGE>

          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/or class securities issuable under
the Plan and (ii) 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 determined by
the Plan Administrator shall be final, binding and conclusive. In no event shall
any such adjustments be made in connection with the conversion of one of more
outstanding shares of the Corporation's preferred stock into shares of Common
Stock.

                                  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 in accordance with the following provisions:

                  (i)  The exercise price per share shall not be less than
     eighty-five percent (85%) of the Fair Market Value per share of Common
     Stock on the option grant date.

                  (ii) If the person to whom the option is granted is a 10%
     Shareholder, 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.

              2.  The exercise price shall become immediately due upon exercise
of the option and shall, subject to the provisions of Section I of Article Four
and the documents evidencing the option, be payable in cash or check made
payable to the Corporation. Should the Common Stock be registered under Section
12(g) of the 1934 Act at the time the option is exercised, then the exercise
price may also be paid as follows:

                  (i) in 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

                  (ii) to the extent the option is exercised for vested shares,
     through all special sale and remittance procedure pursuant to which the
     Optionee shall

                                       3
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     concurrently provide irrevocable written instructions (A) to the
     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) to 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 grant.  However, no option shall have a term in excess of ten (10)
years measured from the option grant due.

          C.  Effect of Termination of Services.
              ---------------------------------

              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)   Should the Optionee cease to remain in Service for any
     reason other than Disability or death, then the Optionee shall have a
     period of three (3) months following the date of such cessation of Service
     during which to exercise each outstanding option held by such Optionee.

                  (ii)  Should Optionee's Service terminate by reason of
     Disability, then the Optionee shall have a period of twelve (12) months
     following the date of such cessation of Service during which to exercise
     each outstanding option held by such Optionee.

                  (iii) If the Optionee dies while holding an outstanding
     option, then the personal representative of his or her estate or the person
     or persons to whom the option is transferred pursuant to the Optionee's
     will or the laws of inheritance shall have a twelve (12)-month period
     following the date of the Optionee's death to exercise such option.

                  (iv)  Under no circumstances, however, shall any such option
     be exercisable after the specified expiration of the option term.

                  (v)   During the application 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

                                       4
<PAGE>

     outstanding with respect to any and all option shares for which the option
     is not otherwise at the time exercisable or in which the Optionee is not
     otherwise at the time vested.

          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 Optionee's cessation of Service or death from the
     limited 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.

          D.  Shareholder Rights.  The holder of an option shall have no
              ------------------
shareholder 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.  Unvested Shares.  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, all or (at the discretion of the Corporation and with the consent of the
Optionee) any 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.  The Plan Administrator may not impose a vesting schedule upon
any option grant or any shares of Common Stock subject to the option which is
more restrictive than twenty percent (20%) per year vesting, with the initial
vesting to occur not later than one (1) year after the option grant date.
However, this minimum vesting requirement shall not be applicable with respect
to any options granted to an officer or Board member.

          F.  First Refusal Rights.  Until such time as the Common Stock is
              --------------------
first registered under Section 12(g) of the 1934 Act, the Corporation shall have
the right of first refusal with respect to any proposed disposition by the
Optionee (or any successor in interest) of any shares of Common Stock issued
under the Plan.  Such right of first refusal shall be exercisable in accordance
with the terms established by the Plan Administrator and set froth in the
document evidencing such right.

          G.  Limited Transferability by Options.  During the lifetime of the
              ----------------------------------
Optionee, the option 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.

                                       5
<PAGE>

          H.  Withholding.  The Corporation's obligation to deliver shares of
              -----------
Common Stock upon the exercise of any options granted under the Plan shall be
subject to the satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements.

     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 shall not be subject to the
                                                           ---
terms of this Section II.

          I.  Eligibility.  Incentive Options may only be granted to Employees.
              -----------

          J.  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.

          K.  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% Shareholder.  If any Employee to whom an Incentive Option is
              ---------------
granted is a 10% Shareholder, then the option term shall not exceed five (5)
years measured from the option grant date.

     III. CORPORATE TRANSACTION

          A.  The shares subject to each option outstanding under the Plan at
the time of a Corporate Transaction shall automatically vest in full 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 that option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock.  However, the shares subject to
an outstanding option shall not vest on such an accelerated basis if and to the
extent:  (i) such option is assumed by the successor corporation (or parent
thereof) in the Corporate Transaction and the Corporation's repurchase rights
with respect to the unvested option shares are concurrently assigned to such
successor corporation (or parent thereof) or (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 those unvested option shares or (iii) the
acceleration of such option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant.

                                       6
<PAGE>

          B.  All outstanding repurchase rights 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 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.  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).

          D.  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 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.

          E.  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 (in whole or in part) 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 terminated 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.

          F.  The Plan Administrator shall also have full power and authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to structure such option so that the shares subject
to that option will automatically vest on an accelerated basis should the
Optionee's Service terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which the option is assumed and the
repurchase rights applicable to those shares do not otherwise terminate.  Any
such option shall remain exercisable for the fully-vested option 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.  In addition, the Plan Administrator may provide that one or more
of the outstanding repurchase rights with respect to shares held by the Optionee
at the time of such Involuntary Termination shall immediately terminate on an
accelerated basis, and the shares subject to those terminated rights shall
accordingly vest.

          G.  The portion of any Incentive Option accelerated in connection with
a Corporate Transaction 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.

                                       7
<PAGE>

          H.  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.

     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 Plan and to grant in
substitution therefor 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.

                                 ARTICLE THREE

                             STOCK ISSUANCE PROGRAM
                             ----------------------

     I.   STOCK ISSUANCE TERMS

          Shares of Common Stock maybe issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.

          A.  Purchase Price.
              --------------

              1.  The purchase 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 issue date.  However, the purchase
price per share of Common Stock issued to a 10% Shareholder shall not be less
than one hundred and ten percent (110%) of such Fair Market Value.

              2.  Subject to the provisions of Section I of Article Four, shares
of Common Stock may be issued under the Stock Issuance Program for any of the
following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:

                  (i)  cash or check made payable to the Corporation, or

                  (ii) past services rendered to the Corporation (or any Parent
     or Subsidiary).

          B.  Vesting Provisions.
              ------------------

              1.  Shares of Common Stock issued under the Stock Issuance Program
may, in the discretion of the Plan Administrator, be fully and immediately
vested upon issuance or may vest in one or more installments over the
Participant's period of Service or upon attainment of specified performance
objectives.  However, the Plan Administrator may not

                                       8
<PAGE>

impose a vesting schedule upon any stock issuance effected under the Stock
Issuance Program which is more restrictive than twenty percent (20%) per year
vesting, with initial vesting to occur not later than one (1) year after the
issuance date. However, this minimum vesting requirement shall not be applicable
with respect to any stock issued to an officer or Board member.

              2.  Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
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 shall  be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.

              3.  The Participant shall have full shareholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.

              4.  Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further shareholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to such surrendered shares.

              5.  The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock (or
other assets attributable thereto) which would otherwise occur upon the non-
completion of the vesting schedule applicable to such shares. Such waiver shall
result in the immediate vesting of the Participant's interest in the shares of
Common Stock as to which the waiver applies. Such waiver may be effected at any
time, whether before or after the Participant's cessation of Service or the
attainment or non-attainment of the applicable performance objectives.

          C.  First Refusal Rights.  Until such time as the Common Stock is
              --------------------
first registered under Section 12(g) of the 1934 Act, the Corporation shall have
the right of first refusal with respect to any proposed disposition by the
Participant (or any successor in interest) of any shares of Common Stock issued
under the Stock Issuance Program.  Such right of first refusal shall be
exercisable in accordance with the terms established by the Plan Administrator
and set forth in the document evidencing such right.

                                       9
<PAGE>

     II.  CORPORATE TRANSACTION

          A.  Upon the occurrence of a Corporate Transaction, all outstanding
repurchase rights under the Stock Issuance Program shall terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, except to the extent:  (i) those repurchase
rights are 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.

          B.  The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights with respect to those shares remain
outstanding, to provide that those rights shall automatically terminate on an
accelerated basis, and the shares of Common Stock subject to those terminated
rights shall immediately vest, in the event the Participant's Service should
subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which those repurchase rights are assigned
to the successor corporation (or parent thereof).

     III. SHARE ESCROW/LEGENDS

          Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.

                                  ARTICLE FOUR

                                 MISCELLANEOUS
                                 -------------

     I.   FINANCING

          The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price or the purchase price for shares issued to such person
under the Plan by delivering a full-recourse, interest-bearing promissory note
payable in one or more installments and secured by the purchased shares.
However, any promissory note delivered by a consultant must be secured by
property in addition to the purchased shares of Common Stock.  In no event shall
the maximum credit available to the Optionee or Participant exceed the sum of
                                                                       ---
(i) the aggregate option exercise price or purchase price payable for the
purchased shares plus (ii) any Federal, state and local income and employment
tax liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.

     II.  EFFECTIVE DATA AND TERM OF PLAN

          A.  The Plan shall become effective when adopted by the Board, but not
option granted under the Plan may be exercised, and no shares shall be issued
under the Plan, until the Plan is approved by the Corporation's shareholders.
If such shareholder approval is not obtained within twelve (12) months after the
date of the Board's adoption of the Plan, then all options previously granted
under the Plan shall terminate and cease to be outstanding, and no further
options shall be granted and no shares shall be issued under the Plan.  Subject
to such

                                       10
<PAGE>

limitation, the Plan Administrator may grant options and issue shares under the
Plan at any time after the effective date of the Plan and before the date fixed
herein for termination of the Plan.

          B.  The Plan shall terminate upon the earliest of (i) the expiration
                                                --------
of the ten (10)-year period measured from the date the Plan is adopted by the
Board, (ii) the date on which all shares available for issuance under the Plan
shall have been issued or (iii) the termination of all outstanding options in
connection with a Corporate Transaction.  All options and unvested stock
issuances outstanding at the time under the Plan shall continue to have full
force and effect in accordance with the provisions of the documents evidencing
such options or issuances.

     III. 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 unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require shareholder approval
pursuant to applicable laws and regulations.

          B.  Options may be granted under the Option Grant Program and shares
may be issued under the Stock Issuance Program which are in each instance in
excess of the number of shares of Common Stock then available for issuance under
the Plan, provided any excess shares actually issued under those programs shall
be held in escrow until there is obtained shareholder approval of an amendment
sufficiently increasing the number of shares of Common Stock available for
issuance under the Plan.  If such shareholder approval is not obtained within
twelve (12) months after the date 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 and the Participants the exercise or purchase price paid
for any excess share 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.

     IV.  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.

     V.   WITHHOLDING

          The Corporation's obligation to deliver shares of Common Stock upon
the exercise of any options or upon the issuance or vesting of any shares issued
under the Plan shall be subject to the satisfaction of all applicable Federal,
state and local income and employment tax withholding requirements.

     VI.  REGULATORY APPROVALS

          The implementation of the Plan, the granting of any options under the
Plan and the issuance of any shares of Common Stock (i) upon the exercise of any
option or (ii) under the

                                       11
<PAGE>

Stock Issuance Program 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.

     VII.  NO EMPLOYMENT OR SERVICE RIGHTS

           Nothing in the Plan shall confer upon the Optionee or the Participant
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 or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.

     VIII. FINANCIAL REPORTS

           The Corporation shall deliver a balance sheet and an income
statement at least annually to each individual holding an outstanding option
under the Plan, unless such individual is a key Employee whose duties in
connection with the Corporation (or any Parent or Subsidiary) assure such
individual access to equivalent information.

                                       12
<PAGE>

                                    APPENDIX
                                    --------

          The following definitions shall be in effect under the Plan:

     A.  Board shall mean the Corporation's Board of Directors.
         -----

     B.  Code shall mean the Internal Revenue Code of 1986, as amended.
         ----

     C.  Committee shall mean a committee of two (2) or more Board members
         ---------
appointed by the Board to exercise one or more administrative functions under
the Plan.

     D.  Common Stock shall mean the Corporation's common stock.
         ------------

     E.  Corporate Transaction shall mean either of the following shareholder-
         ---------------------
approved transactions to which the Corporation is a party:

               (i)  a merger or consolidation in which securities possessing
     more than fifth 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 Corporation's assets in complete liquidation or
     dissolution of the Corporation.

     F.  Corporation shall mean Lexar Media, Inc., a California corporation.
         -----------

     G.  Disability shall mean the inability of the Optionee or the Participant
         ----------
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment and shall be determined by the Plan
Administrator on the basis of such medical evidence as the Plan Administrator
deems warranted under the circumstances.

     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 or any successor system.  If there is no closing selling
     price for the Common Stock on the date in question,

                                      A-1
<PAGE>

     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.

               (iii) If the Common Stock is at the time neither listed on any
     Stock Exchange nor traded on the Nasdaq National Market, then the Fair
     Market Value shall be determined by the Plan Administrator after taking
     into account such factors as the Plan Administrator shall deem appropriate.

     K.  Incentive Option shall mean an option which satisfies the requirements
         ----------------
of Code Section 422.

     L.  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

               (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 target bonuses
     under any corporate-performance based bonus or incentive programs) by more
     than fifteen percent (15%) of (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 without the individual's
     consent.

     M.  Misconduct shall mean the commission of any act of fraud, embezzlement
         ----------
or dishonesty by the Optionee or Participant, 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
be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or discharge
of any Optionee, Participant or other person in the Service of the Corporation
(or any Parent or Subsidiary).

     N.  1934 Act shall mean the Securities Exchange Act of 1934, as amended.
         --------

     O.  Non-Statutory Option shall mean an option not intended to satisfy the
         --------------------
requirements of Code Section 422.

                                      A-2
<PAGE>

     P.  Option Grant Program shall mean the option grant program in effect
         --------------------
under the Plan.

     Q.  Optionee shall mean any person to whom an option is granted under the
         --------
Plan.

     R.  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.

     S.  Participant shall mean any person who is issued shares of Common Stock
         -----------
under the Stock Issuance Program.

     T.  Plan shall mean the Corporation's 1996 Stock Option/Stock Issuance
         ----
Plan, as set forth in this document.

     U.  Plan Administrator shall mean either the Board or the Committee acting
         ------------------
in its capacity as administrator of the Plan.

     V.  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.

     W.  Stock Exchange shall mean either the American Stock Exchange or the New
         --------------
York Stock Exchange.

     X.  Stock Issuance Agreement shall mean the agreement entered into by the
         ------------------------
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.

     Y.  Stock Issuance Program shall mean the stock issuance program in effect
         ----------------------
under the Plan.

     Z.  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.

     AA. 10% Shareholder 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).

                                      A-3
<PAGE>


                               LEXAR MEDIA, INC.
                        NOTICE OF GRANT OF STOCK OPTION
                        -------------------------------


          Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Lexar Media, Inc. (the "Corporation"):

          Optionee:
          --------

          Grant Date:
          ----------

          Vesting Commencement Date:
          -------------------------

          Exercise Price:
          --------------

          Number of Option Shares:
          -----------------------

          Expiration Date:
          ---------------

          Type of Option:
          --------------



          Date Exercisable:  Immediately Exercisable
          ----------------

          Vesting Schedule:  The Option Shares shall be unvested and subject to
          ----------------
          repurchase by the Corporation at the Exercise Price paid per share.
          Optionee shall acquire a vested interest in, and the Corporation's
          repurchase right will accordingly lapse with respect to, (i) twenty-
          five percent (25%) of the Option Shares upon Optionee's completion of
          one (1) year of Service measured from the Vesting Commencement Date
          and (ii) the balance of the Option Shares in a series of thirty-six
          (36) successive equal monthly installments upon Optionee's completion
          of each additional month of Service over the thirty-six (36)-month
          period measured from the first anniversary of the Vesting Commencement
          Date.  In no event shall any additional Option Shares vest after
          Optionee's cessation of Service.

          Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the Lexar Media, Inc. 1996 Stock
Option/Stock Issuance Plan (the "Plan").  Optionee further agrees to be bound by
the terms of the Plan and the terms of the Option as set forth in the Stock
Option Agreement attached hereto as Exhibit A.  Optionee understands that any
Option Shares purchased under the Option will be subject to the terms set forth
in the Stock Purchase Agreement attached hereto as Exhibit B.

          Optionee hereby acknowledges receipt of a copy of the Plan in the form
attached hereto as Exhibit C.
<PAGE>

          REPURCHASE RIGHTS.  OPTIONEE HEREBY AGREES THAT ALL OPTION SHARES
          -----------------
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO CERTAIN REPURCHASE
RIGHTS AND RIGHTS OF FIRST REFUSAL EXERCISABLE BY THE CORPORATION AND ITS
ASSIGNS.  THE TERMS OF SUCH RIGHTS ARE SPECIFIED IN THE ATTACHED STOCK PURCHASE
AGREEMENT.

          No Employment or Service Contract:  Nothing in this Notice or in the
          ---------------------------------
attached Stock Option Agreement or Plan shall confer upon 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 Optionee) or of Optionee, which rights are
hereby expressly reserved by each, to terminate Optionee's Service at any time
for any reason, with or without cause.

          Definitions:  All capitalized terms in this Notice shall have the
          -----------
meaning assigned to them in this Notice or in the attached Stock Option
Agreement.

--------------
Date


                              LEXAR MEDIA, INC.


                              By:
                                 ----------------------------------
                              Name:
                                   --------------------------------
                              Title:
                                    -------------------------------


                              -------------------------------------
                              Optionee

                              Address:
                                      -----------------------------
                              -------------------------------------


ATTACHMENTS
-----------
Exhibit A - Stock Option Agreement
Exhibit B - Stock Purchase Agreement
Exhibit C - 1996 Stock Option/Stock Issuance Plan

                                       2
<PAGE>

                                   EXHIBIT A
                                   ---------

                            STOCK OPTION AGREEMENT
                            ----------------------
<PAGE>

                                   EXHIBIT B
                                   ---------

                           STOCK PURCHASE AGREEMENT
                           ------------------------
<PAGE>

                                   EXHIBIT C
                                   ---------

                     1996 STOCK OPTION/STOCK ISSUANCE PLAN
                     -------------------------------------
<PAGE>

                               LEXAR MEDIA, INC.
                            STOCK OPTION AGREEMENT
                            ----------------------



RECITALS
--------

     A.  The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or the board
of directors of any Parent or Subsidiary and consultants and other independent
advisors in the service of the Corporation (or any Parent or Subsidiary).

     B.  Optionee is to render valuable services to the Corporation (or a Parent
or Subsidiary), and this Agreement is executed pursuant to, and is intended to
carry out the purposes of, the Plan in connection with the Corporation's grant
of an option to Optionee.

     C.  All capitalized terms in this Agreement shall have the meaning assigned
to them in the attached Appendix.

          NOW, THEREFORE, it is hereby agreed as follows:

          1.  Grant of Option.  The Corporation hereby grants to Optionee, as of
              ---------------
the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice.  The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.

          2.  Option Term.  This option shall have a term of ten (10) years
              -----------
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.

          3.  Limited Transferability.  During Optionee's lifetime, this option
              -----------------------
shall be exercisable only by Optionee and shall not be assignable or
transferable other than by will or by the laws of descent and distribution
following Optionee's death.

          4.  Dates of Exercise.  This option shall become exercisable for the
              -----------------
Option Shares in one or more installments as specified in the Grant Notice.  As
the option becomes exercisable for such installments, those installments shall
accumulate and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.

          5.  Cessation of Service.  The option term specified in Paragraph 2
              --------------------
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:

          (a) Should Optionee cease to remain in Service for any reason (other
than death or Disability) while this option is outstanding, then Optionee shall
have a period of
<PAGE>

three (3) months (commencing with the date of such cessation of
Service) during which to exercise this option, but in no event shall this option
be exercisable at any time after the Expiration Date.

          (b)  Should Optionee die while this option is outstanding, then the
personal representative of Optionee's estate or the person or persons to whom
the option is transferred pursuant to Optionee's will or in accordance with the
laws of inheritance shall have the right to exercise this option.  Such right
shall lapse, and this option shall cease to be outstanding, upon the earlier of
                                                                     -------
(i) the expiration of the twelve (12)-month period measured from the date of
Optionee's death or (ii) the Expiration Date.

          (c)  Should Optionee cease Service by reason of Disability while this
option is outstanding, then Optionee shall have a period of twelve (12) months
(commencing with the date of such cessation of Service) during which to exercise
this option.  In no event shall this option be exercisable at any time after the
Expiration Date.

          Note:  Exercise of this option on a date later than three (3) months
          ----
          following cessation of Service due to Disability will result  in loss
          of favorable Incentive Option treatment, unless such Disability
                                                   ------
          constitutes Permanent Disability.  In the event that Incentive Option
          treatment is not available, this option will be taxed as a Non-
          Statutory Option upon exercise.

          (d)  During the limited period of post-Service exercisability, this
option may not be exercised in the aggregate for more than the number of Option
Shares in which Optionee is, at the time of Optionee's cessation of Service,
vested pursuant to the Vesting Schedule specified in the Grant Notice or the
special vesting acceleration provisions of Paragraph 6.  Upon the expiration of
such exercise period or (if earlier) upon the Expiration Date, this option shall
terminate and cease to be outstanding for any vested Option Shares for which the
option has not been exercised.  To the extent Optionee is not vested in the
Option Shares at the time of Optionee's cessation of Service, this option shall
immediately terminate and cease to be outstanding with respect to those shares.

          6.  Accelerated Vesting.
              -------------------

          (a)  In the event of any Corporate Transaction, the Option Shares at
the time subject to this option but not otherwise vested shall automatically
vest in full so that this option shall, immediately prior to the effective date
of the Corporate Transaction, become fully exercisable for all of those Option
Shares and may be exercised for any or all of those Option Shares as fully-
vested shares of Common Stock.  However, the Option Shares shall not vest on
such an accelerated basis if and to the extent:  (i) this option is assumed by
the successor corporation (or parent thereof) in the Corporate Transaction and
the Corporation's repurchase rights with respect to the unvested Option Shares
are assigned to such successor corporation (or parent thereof) or (ii) this
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 (the excess of the Fair Market Value of
those Option Shares over the

                                       2
<PAGE>

Exercise Price payable for such shares) and provides for subsequent payout in
accordance with the same Vesting Schedule applicable to those unvested Option
Shares as set forth in the Grant Notice.

          (b)  Immediately following the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) in connection with the Corporate
Transaction.

          (c)  If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same.
       --------

          (d)  This option may also become exercisable upon an accelerated basis
in accordance with the terms and conditions of any special addendum attached to
this Agreement.

          (e)  This Agreement shall not in any 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.

          7.  Adjustment in Option Shares.  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 total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.

          8.  Shareholder Rights.  The holder of this option shall not have any
              ------------------
shareholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.

          9.  Manner of Exercising Option.
              ---------------------------

          (a)  In order to exercise this option with respect to all of any part
of the Option Shares for which this option is at the time exercisable, Optionee
(or any other person or person exercising the option) must take the following
actions:

               (i)  Execute and deliver to the Corporation a Purchase Agreement
     for the Option Shares for which the option is exercised.

               (ii)  Pay the aggregate Exercise Price for the purchased shares
     in one or more of the following forms:

                                       3
<PAGE>

                         (A)  cash or check made payable to the Corporation; or

                         (B)  a promissory note payable to the Corporation, but
          only to the extent authorized by the Plan Administrator in accordance
          with Paragraph 14 .

               Should the Common Stock be registered under Section 12(g) of the
          1934 Act at the time the option is exercised, then the Exercise Price
          may also be paid as follows:

                         (C)  in shares of Common Stock held by Optionee (or any
          other person or persons exercising the option) 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

                         (D)  to the extent the option is exercised for vested
          Option Shares, through a special sale and remittance procedure
          pursuant to which Optionee (or any other person or persons exercising
          the option) shall concurrently provide irrevocable written
          instructions (a) to 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) to 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 the sale and remittance procedure is
          utilized in connection with the option exercise, payment of the
          Exercise Price must accompany the Purchase Agreement delivered to the
          Corporation in connection with the option exercise.

               (iii)  Furnish to the Corporation appropriate documentation that
     the person or persons exercising the option (if other than Optionee) have
     the right to exercise this option.

               (iv)   Execute and deliver to the Corporation such written
     representations as may be requested by the Corporation in order for it to
     comply with the applicable requirements of Federal and state securities
     laws.

               (v)    Make appropriate arrangements with the Corporation (or
     Parent or Subsidiary employing or retaining Optionee) for the satisfaction
     of all Federal, state and local income and employment tax withholding
     requirements applicable to the option exercise.

                                       4
<PAGE>

               (b)  As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.

               (c)  In no event may this option be exercised for any fractional
shares.

          10.   REPURCHASE RIGHTS. ALL OPTION SHARES ACQUIRED UPON THE EXERCISE
                -----------------
OF THIS OPTION SHALL BE SUBJECT TO CERTAIN RIGHTS OF THE CORPORATION AND ITS
ASSIGNS TO REPURCHASE THOSE SHARES IN ACCORDANCE WITH THE TERMS SPECIFIED IN THE
PURCHASE AGREEMENT.

          11.   Compliance with Laws and Regulations.
                ------------------------------------

                (a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.

               (b)  The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.

          12.   Successors and Assigns.  Except to the extent otherwise provided
                ----------------------
in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns and the legal representatives, heirs and
legatees of Optionee's estate.

          13.   Notices.  Any notice required to be given or delivered to the
                -------
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices.  Any notice required to
be given or delivered to Optionee shall be in writing and addressed to Optionee
at the address indicated below Optionee's signature line on the Grant Notice.
All notices shall be deemed effective upon personal delivery or upon deposit in
the U.S. mail, postage prepaid and properly addressed to the party to be
notified.

          14.   Financing.  The Plan Administrator may, in its absolute
                ---------
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a full-recourse,
interest-bearing promissory note secured by those Option Shares.  The payment
schedule in effect for any such promissory note shall be established by the Plan
Administrator in its sole discretion.

                                       5
<PAGE>

          15.   Construction.  This Agreement and the option evidenced hereby
                ------------
are made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan.  All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.

          16.   Governing Law.  The interpretation, performance and enforcement
                -------------
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.

          17.   Shareholder Approval.  If the Option Shares covered by this
                --------------------
Agreement exceed, as of the Grant Date, the number of shares of Common Stock
which may be issued under the Plan as last approved by the shareholders, then
this option shall be void with respect to such excess shares, unless shareholder
approval of an amendment sufficiently increasing the number of shares of Common
Stock issuable under the Plan is obtained in accordance with the provisions of
the Plan.

          18.   Additional Terms Applicable to an Incentive Option.  In the
                --------------------------------------------------
event this option is designated an Incentive Option in the Grant Notice, the
following terms and conditions shall also apply to the grant:

                (a)  This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is exercised
for one or more Option Shares: (i) more than three (3) months after the date
Optionee ceases to be an Employee for any reason other than death or Permanent
Disability or (ii) more than twelve (12) months after the date Optionee ceases
to be an Employee by reason of Permanent Disability.

                (b)  This option shall not become exercisable in the calendar
year in which granted if (and to the extent) the aggregate Fair Market Value
(determined at the Grant Date) of the Common Stock for which this option would
otherwise first become exercisable in such calendar year would, when added to
the aggregate value (determined as of the respective date or dates of grant) of
the Common Stock and any other securities for which one or more other Incentive
Options granted to Optionee prior to the Grant Date (whether under the Plan or
any other option plan of the Corporation or any Parent or Subsidiary) first
become exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000) in the aggregate. To the extent the exercisability of this
option is deferred by reason of the foregoing limitation, the deferred portion
shall become exercisable in the first calendar year or years thereafter in which
the One Hundred Thousand Dollar ($100,000) limitation of this Paragraph 18(b)
would not be contravened, but such deferral shall in all events end immediately
prior to the effective date of a Corporate Transaction in which this option is
not to be assumed, whereupon the option shall become immediately exercisable as
a Non-Statutory Option for the deferred portion of the Option Shares.

                                      6
<PAGE>

                (c)  Should Optionee hold, in addition to this option, one or
more other options to purchase Common Stock which become exercisable for the
first time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.


                                       7
<PAGE>

                                    APPENDIX



          The following definitions shall be in effect under the Agreement:

     A.   Agreement shall mean this Stock Option Agreement.
          ---------

     B.   Board shall mean the Corporation's Board of Directors.
          -----

     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 shareholder
          ---------------------
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 Corporation's assets in complete liquidation or
     dissolution of the Corporation.

     F.   Corporation shall mean Lexar Media, Inc., a California corporation.
          -----------

     G.   Disability shall mean the inability of Optionee to engage in any
          ----------
substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be determined by the Plan Administrator on the basis
of such medical evidence as the Plan Administrator deems warranted under the
circumstances.  Disability shall be deemed to constitute Permanent Disability in
the event that such Disability is expected to result in death or has lasted or
can be expected to last for a continuous period of twelve (12) months or more.

     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 option shall have been
          -------------
exercised in accordance with Paragraph 9 of the Agreement.

     J.   Exercise Price shall mean the exercise price payable per Option Share
          --------------
as specified in the Grant Notice.

                                      A-1
<PAGE>

     K.   Expiration Date shall mean the date on which the option expires as
          ---------------
specified in the Grant Notice.

     L.  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 the 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.

               (iii)   If the Common Stock is at the time neither listed on any
     Stock Exchange nor traded on the Nasdaq National Market, then the Fair
     Market Value shall be determined by the Plan Administrator after taking
     into account such factors as the Plan Administrator shall deem appropriate.

     M.   Grant Date shall mean the date of grant of the option as specified in
          ----------
the Grant Notice.

     N.   Grant Notice shall mean the Notice of Grant of Stock Option
          ------------
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.

     O.   Incentive Option shall mean an option which satisfies the requirements
          ----------------
of Code Section 422.

     P.   1934 Act shall mean the Securities Exchange Act of 1934, as amended.
          --------

     Q.   Non-Statutory Option shall mean an option not intended to satisfy the
          --------------------
requirements of Code Section 422.

     R.   Option Shares shall mean the number of shares of Common Stock subject
          -------------
to the option.

                                      A-2
<PAGE>

     S.   Optionee shall mean the person to whom the option is granted as
          --------
specified in the Grant Notice.

     T.  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.

     U.   Plan shall mean the Corporation's 1996 Stock Option/Stock Issuance
          ----
Plan.

     V.   Plan Administrator shall mean either the Board or a committee of the
          ------------------
Board acting in its capacity as administrator of the Plan.

     W.   Purchase Agreement shall mean the stock purchase agreement in
          ------------------
substantially the form of Exhibit B to the Grant Notice.

     X.   Service shall mean the Optionee's performance of services for the
          -------
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-
employee member of the board of directors or an independent consultant.

     Y.   Stock Exchange shall mean the American Stock Exchange or the New York
          --------------
Stock Exchange.

     Z.   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.

     AA.  Vesting Schedule shall mean the vesting schedule specified in the
          ----------------
Grant Notice pursuant to which the Optionee is to vest in the Option Shares in a
series of installments over his or her period of Service.


                                      A-3
<PAGE>

                               LEXAR MEDIA, INC.
                            STOCK PURCHASE AGREEMENT
                            ------------------------

     AGREEMENT made this ___ day of ___________ ______, by and between Lexar
Media, Inc., a California corporation, and _________________, Optionee under the
Corporation's 1996 Stock Option/Stock Issuance Plan.

     All capitalized terms in this Agreement shall have the meaning assigned to
them in this Agreement or in the attached Appendix.

     A.  EXERCISE OF OPTION
         ------------------

         1.  Exercise.  Optionee hereby purchases _______ shares of Common
             --------
Stock (the "Purchased Shares") pursuant to that certain option (the "Option")
granted Optionee on _____________, _____ (the "Grant Date") to purchase up to
_________ shares of Common Stock (the "Option Shares") under the Plan at the
exercise price of $__________ per share (the "Exercise Price").

         2.  Payment.  Concurrently with the delivery of this Agreement to the
             -------
Corporation, Optionee shall pay the Exercise Price for the Purchased Shares in
accordance with the provisions of the Option Agreement and shall deliver
whatever additional documents may be required by the Option Agreement as a
condition for exercise, together with a duly-executed blank Assignment Separate
from Certificate (in the form attached hereto as Exhibit I) with respect to the
Purchased Shares.

         3.  Shareholder Rights.  Until such time as the Corporation exercises
             ------------------
the Repurchase Right or the First Refusal Right, Optionee (or any successor in
interest) shall have all the rights of a shareholder (including voting, dividend
and liquidation rights) with respect to the Purchased Shares, subject, however,
to the transfer restrictions of Articles B and C.

     B.  SECURITIES LAW COMPLIANCE
         -------------------------

         1.  Restricted Securities.  The Purchased Shares have not been
             ---------------------
registered under the 1933 Act and are being issued to Optionee in reliance upon
the exemption from such registration provided by SEC Rule 701 for stock
issuances under compensatory benefit plans such as the Plan.  Optionee hereby
confirms that Optionee has been informed that the Purchased Shares are
restricted securities under the 1933 Act and may not be resold or transferred
unless the Purchased Shares are first registered under the Federal securities
laws or unless an exemption from such registration is available.  Accordingly,
Optionee hereby acknowledges that Optionee is prepared to hold the Purchased
Shares for an indefinite period and that Optionee is aware that SEC Rule 144
issued under the 1933 Act which exempts certain resales of unrestricted
securities is not presently available to exempt the resale of the Purchased
Shares from the registration requirements of the 1933 Act.
<PAGE>

         2.  Restrictions on Disposition of Purchased Shares.  Optionee shall
             -----------------------------------------------
make no disposition of the Purchased Shares (other than a Permitted Transfer)
unless and until there is compliance with all of the following requirements:

             (i)   Optionee shall have provided the Corporation with a written
summary of the terms and conditions of the proposed disposition.

             (ii)  Optionee shall have complied with all requirements of this
Agreement applicable to the disposition of the Purchased Shares.

             (iii) Optionee shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that (a) the
proposed disposition does not require registration of the Purchased Shares under
the 1933 Act or (b) all appropriate action necessary for compliance with the
registration requirements of the 1933 Act or any exemption from registration
available under the 1933 Act (including Rule 144) has been taken.

         The Corporation shall not be required (i) to transfer on its books any
                               ---
Purchased Shares which have been sold or transferred in violation of the
provisions of this Agreement or (ii) to treat as the owner of the Purchased
                             --
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.

         3.  Restrictive Legends.  The stock certificates for the Purchased
             -------------------
Shares shall be endorsed with one or more of the following restrictive legends:

             "The shares represented by this certificate have not been
          registered under the Securities Act of 1933.  The shares may not be
          sold or offered for sale in the absence of (a) an effective
          registration statement for the shares under such Act, (b) a "no
          action" letter of the Securities and Exchange Commission with respect
          to such sale or offer or (c) satisfactory assurances to the
          Corporation that registration under such Act is not required with
          respect to such sale or offer."

             "The shares represented by this certificate are subject to
          certain repurchase rights and rights of first refusal granted to the
          Corporation and accordingly may not be sold, assigned, transferred,
          encumbered, or in any manner disposed of except in conformity with the
          terms of a written agreement between the Corporation and the
          registered holder of the shares (or the predecessor in interest to the
          shares).  A copy of such agreement is maintained at the Corporation's
          principal corporate offices."

                                       2
<PAGE>

     C.  TRANSFER RESTRICTIONS
         ---------------------

         1.  Restriction on Transfer.  Except for any Permitted Transfer,
             -----------------------
Optionee shall not transfer, assign, encumber or otherwise dispose of any of the
Purchased Shares which are subject to the Repurchase Right.  In addition,
Purchased Shares which are released from the Repurchase Right shall not be
transferred, assigned, encumbered or otherwise disposed of in contravention of
the First Refusal Right or the Market Stand-Off.

         2.  Transferee Obligations.  Each person (other than the Corporation)
             ----------------------
to whom the Purchased Shares are transferred by means of a Permitted Transfer
must, as a condition precedent to the validity of such transfer, acknowledge in
writing to the Corporation that such person is bound by the provisions of this
Agreement and that the transferred shares are subject to (i) the Repurchase
Right, (ii) the First Refusal Right and (iii) the Market Stand-Off, to the same
extent such shares would be so subject if retained by Optionee.

         3.  Market Stand-Off.
             ----------------

             (a)  In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any Purchased Shares without the prior written consent of the
Corporation or its underwriters.  Such restriction (the "Market Stand-Off")
shall be in effect for such period of time from and after the effective date of
the final prospectus for the offering as may be requested by the Corporation or
such underwriters.  In no event, however, shall such period exceed one hundred
eighty (180) days and the Market Stand-Off shall in all events terminate two (2)
years after the effective date of the Corporation's initial public offering.

             (b)  Owner shall be subject to the Market Stand-Off provided and
                                                                 ------------
only if the officers and directors of the Corporation are also subject to
----
similar restrictions.

             (c)  Any new, substituted or additional securities which are by
reason of any Recapitalization or Reorganization distributed with respect to the
Purchased Shares shall be immediately subject to the Market Stand-Off, to the
same extent the Purchased Shares are at such time covered by such provisions.

             (d)  In order to enforce the Market Stand-Off, the Corporation may
impose stop-transfer instructions with respect to the Purchased Shares until the
end of the applicable stand-off period.

                                       3
<PAGE>

      D.  REPURCHASE RIGHT
          ----------------

          1.  Grant.  The Corporation is hereby granted the right (the
              -----
"Repurchase Right"), exercisable at any time during the sixty (60)-day period
following the date Optionee ceases for any reason to remain in Service or (if
later) during the sixty (60)-day period following the execution date of this
Agreement, to repurchase at the Exercise Price all or (at the discretion of the
Corporation and with the consent of Optionee) any portion of the Purchased
Shares in which Optionee is not, at the time of his or her cessation of Service,
vested in accordance with the Vesting Schedule (such shares to be hereinafter
referred to as the "Unvested Shares").

          2.  Exercise of the Repurchase Right.  The Repurchase Right shall be
              --------------------------------
exercisable by written notice delivered to each Owner of the Unvested Shares
prior to the expiration of the sixty (60)-day exercise period.  The notice shall
indicate the number of Unvested Shares to be repurchased and the date on which
the repurchase is to be effected, such date to be not more than thirty (30) days
after the date of such notice.  The certificates representing the Unvested
Shares to be repurchased shall be delivered to the Corporation on or before the
close of business on the date specified for the repurchase.  Concurrently with
the receipt of such stock certificates, the Corporation shall pay to Owner, in
cash or cash equivalents (including the cancellation of any purchase-money
indebtedness), an amount equal to the Exercise Price previously paid for the
Unvested Shares which are to be repurchased from Owner.

          3.  Termination of the Repurchase Right.  The Repurchase Right shall
              -----------------------------------
terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph D.2.  In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to any and all Purchased
Shares in which Optionee vests in accordance with the Vesting Schedule.  All
Purchased Shares as to which the Repurchase Right lapses shall, however, remain
subject to (i) the First Refusal Right and (ii) the Market Stand-Off.

          4.  Aggregate Vesting Limitation.  If the Option is exercised in more
              ----------------------------
than one increment so that Optionee is a party to one or more other Stock
Purchase Agreements (the "Prior Purchase Agreements") which are executed prior
to the date of this Agreement, then the total number of Purchased Shares as to
which Optionee shall be deemed to have a fully-vested interest under this
Agreement and all Prior Purchase Agreements shall not exceed in the aggregate
the number of Purchased Shares in which Optionee would otherwise at the time be
vested, in accordance with the Vesting Schedule, had all the Purchased Shares
(including those acquired under the Prior Purchase Agreements) been acquired
exclusively under this Agreement.

          5.  Recapitalization.  Any new, substituted or additional securities
              ----------------
or other property (including cash paid other than as a regular cash dividend)
which is by reason of any Recapitalization distributed with respect to the
Purchased Shares shall be immediately subject to the Repurchase Right and any
escrow requirements hereunder, but

                                       4
<PAGE>

only to the extent the Purchased Shares are at the time covered by such right or
escrow requirements. Appropriate adjustments to reflect such distribution shall
be made to the number and/or class of Purchased Shares subject to this Agreement
and to the price per share to be paid upon the exercise of the Repurchase Right
in order to reflect the effect of any such Recapitalization upon the
Corporation's capital structure; provided, however, that the aggregate purchase
                                 --------
price shall remain the same.

          6.  Corporate Transaction.
              ---------------------

              (a) The Repurchase Right shall automatically terminate in its
entirety, and all the Purchased Shares shall vest in full, immediately prior to
the consummation of any Corporate Transaction, except to the extent the
Repurchase Right is to be assigned to the successor entity in such Corporate
Transaction.

              (b) To the extent the Repurchase Right remains in effect following
a Corporate Transaction, such right shall apply to any new securities or other
property (including any cash payments) received in exchange for the Purchased
Shares in consummation of the Corporate Transaction, but only to the extent the
Purchased Shares are at the time covered by such right. Appropriate adjustments
shall be made to the price per share payable upon exercise of the Repurchase
Right to reflect the effect of the Corporate Transaction upon the Corporation's
capital structure; provided, however, that the aggregate purchase price shall
                   --------
remain the same.  The new securities or other property (including any cash
payments) issued or distributed with respect to the Purchased Shares in
consummation of the Corporate Transaction shall be immediately deposited in
escrow with the Corporation (or the successor entity) and shall not be released
from escrow until Optionee vests in such securities or other property in
accordance with the same Vesting Schedule in effect for the Purchased Shares.

              (c) The Repurchase Right may also terminate on an accelerated
basis, and the Purchased Shares shall immediately vest in full, in accordance
with the terms and conditions of any special addendum attached to this
Agreement.

     E.   RIGHT OF FIRST REFUSAL
          ----------------------

          1.  Grant.  The Corporation is hereby granted the right of first
              -----
refusal (the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares in which Optionee has vested in accordance with
the Vesting Schedule.  For purposes of this Article E, the term "transfer" shall
include any sale, assignment, pledge, encumbrance or other disposition of the
Purchased Shares intended to be made by Owner, but shall not include any
Permitted Transfer.

          2.  Notice of Intended Disposition.  In the event any Owner of
              ------------------------------
Purchased Shares in which Optionee has vested desires to accept a bona fide
third-party offer for the transfer of any or all of such shares (the Purchased
Shares subject to such offer to be hereinafter referred to as the "Target
Shares"), Owner shall promptly (i) deliver to the Corporation written notice
(the "Disposition Notice") of the terms of the


                                       5
<PAGE>

offer, including the purchase price and the identity of the third-party offeror,
and (ii) provide satisfactory proof that the disposition of the Target Shares to
such third-party offeror would not be in contravention of the provisions set
forth in Articles B and C.

          3.  Exercise of the First Refusal Right.  The Corporation shall, for a
              -----------------------------------
period of twenty-five (25) days following receipt of the Disposition Notice,
have the right to repurchase any or all of the Target Shares subject to the
Disposition Notice upon the same terms as those specified therein or upon such
other terms (not materially different from those specified in the Disposition
Notice) to which Owner consents.  Such right shall be exercisable by delivery of
written notice (the "Exercise Notice") to Owner prior to the expiration of the
twenty-five (25)-day exercise period.  If such right is exercised with respect
to all the Target Shares, then the Corporation shall effect the repurchase of
such shares, including payment of the purchase price, not more than five (5)
business days after delivery of the Exercise Notice; and at such time the
certificates representing the Target Shares shall be delivered to the
Corporation.

          Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the
Corporation shall have the right to pay the purchase price in the form of cash
equal in amount to the value of such property.  If Owner and the Corporation
cannot agree on such cash value within ten (10) days after the Corporation's
receipt of the Disposition Notice, the valuation shall be made by an appraiser
of recognized standing selected by Owner and the Corporation or, if they cannot
agree on an appraiser within twenty (20) days after the Corporation's receipt of
the Disposition Notice, each shall select an appraiser of recognized standing
and the two (2) appraisers shall designate a third appraiser of recognized
standing, whose appraisal shall be determinative of such value.  The cost of
such appraisal shall be shared equally by Owner and the Corporation.  The
closing shall then be held on the later of (i) the fifth (5th) business day
                                  -----
following delivery of the Exercise Notice or (ii) the fifth (5th) business day
after such valuation shall have been made.

          4.  Non-Exercise of the First Refusal Right.  In the event the
              ---------------------------------------
Exercise Notice is not given to Owner prior to the expiration of the twenty-five
(25)-day exercise period, Owner shall have a period of thirty (30) days
thereafter in which to sell or otherwise dispose of the Target Shares to the
third-party offeror identified in the Disposition Notice upon terms (including
the purchase price) no more favorable to such third-party offeror than those
specified in the Disposition Notice; provided, however, that any such sale or
                                     --------
disposition must not be effected in contravention of the provisions of Articles
B and C.  The third-party offeror shall acquire the Target Shares free and clear
of the Repurchase Right and the First Refusal Right, but the acquired shares
shall remain subject to the provisions of Article B and Paragraph C.3.  In the
event Owner does not effect such sale or disposition of the Target Shares within
the specified thirty (30)-day period, the First Refusal Right shall continue to
be applicable to any subsequent disposition of the Target Shares by Owner until
such right lapses.

                                       6
<PAGE>

          5.  Partial Exercise of the First Refusal Right.  In the event the
              -------------------------------------------
Corporation makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
Owner shall have the option, exercisable by written notice to the Corporation
delivered within five (5) business days after Owner's receipt of the Exercise
Notice, to effect the sale of the Target Shares pursuant to either of the
following alternatives:

              (i)  sale or other disposition of all the Target Shares to the
third-party offeror identified in the Disposition Notice, but in full compliance
with the requirements of Paragraph E.4, as if the Corporation did not exercise
the First Refusal Right; or

              (ii) sale to the Corporation of the portion of the Target Shares
which the Corporation has elected to purchase, such sale to be effected in
substantial conformity with the provisions of Paragraph E.3. The First Refusal
Right shall continue to be applicable to any subsequent disposition of the
remaining Target Shares until such right lapses.

     Owner's failure to deliver timely notification to the Corporation shall be
deemed to be an election by Owner to sell the Target Shares pursuant to
alternative (i) above.

          6.  Recapitalization/Reorganization.
              -------------------------------

              (a) Any new, substituted or additional securities or other
property which is by reason of any Recapitalization distributed with respect to
the Purchased Shares shall be immediately subject to the First Refusal Right,
but only to the extent the Purchased Shares are at the time covered by such
right.

              (b) In the event of a Reorganization, the First Refusal Right
shall remain in full force and effect and shall apply to the new capital stock
or other property received in exchange for the Purchased Shares in consummation
of the Reorganization, but only to the extent the Purchased Shares are at the
time covered by such right.

          7.  Lapse.  The First Refusal Right shall lapse upon the earliest to
              -----                                                --------
occur of (i) the first date on which shares of the Common Stock are held of
record by more than five hundred (500) persons, (ii) a determination is made by
the Board that a public market exists for the outstanding shares of Common Stock
or (iii) a firm commitment underwritten public offering, pursuant to an
effective registration statement under the 1933 Act, covering the offer and sale
of the Common Stock in the aggregate amount of at least ten million dollars
($10,000,000).  However, the Market Stand-Off shall continue to remain in full
force and effect following the lapse of the First Refusal Right.


                                       7
<PAGE>

      F.  SPECIAL TAX ELECTION
          --------------------

          The acquisition of the Purchased Shares may result in adverse tax
consequences which may be avoided or mitigated by filing an election under Code
Section 83(b).  Such election must be filed within thirty (30) days after the
date of this Agreement.  A description of the tax consequences applicable to the
acquisition of the Purchased Shares and the form for making the Code Section
83(b) election are set forth in Exhibit II.  OPTIONEE SHOULD CONSULT WITH HIS OR
HER TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF ACQUIRING THE PURCHASED
SHARES AND THE ADVANTAGES AND DISADVANTAGES OF FILING THE CODE SECTION 83(b)
ELECTION.  OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY, AND
NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN
IF OPTIONEE REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING
ON HIS OR HER BEHALF.

      G.  GENERAL PROVISIONS
          ------------------

          1.  Assignment.  The Corporation may assign the Repurchase Right
              ----------
and/or the First Refusal Right to any person or entity selected by the Board,
including (without limitation) one or more shareholders of the Corporation.

          If the assignee of the Repurchase Right is other than (i) a wholly
owned subsidiary of the Corporation or (ii) the parent corporation owning one
hundred percent (100%) of the Corporation's outstanding capital stock, then such
assignee must make a cash payment to the Corporation, upon the assignment of the
Repurchase Right, in an amount equal to the excess (if any) of (i) the Fair
Market Value of the Purchased Shares at the time subject to the assigned
Repurchase Right over (ii) the aggregate repurchase price payable for the
Purchased Shares.

          2.  No Employment or Service Contract.  Nothing in this Agreement or
              ---------------------------------
in the Plan shall confer upon 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 Optionee) or of Optionee, which rights are hereby expressly reserved
by each, to terminate Optionee's Service at any time for any reason, with or
without cause.

          3.  Notices.  Any notice required to be given under this Agreement
              -------
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this paragraph
to all other parties to this Agreement.
<PAGE>

          4.  No Waiver.  The failure of the Corporation in any instance to
              ---------
exercise the Repurchase Right or the First Refusal Right shall not constitute a
waiver of any other repurchase rights and/or rights of first refusal that may
subsequently arise under the provisions of this Agreement or any other agreement
between the Corporation and Optionee.  No waiver of any breach or condition of
this Agreement shall be deemed to be a waiver of any other or subsequent breach
or condition, whether of like or different nature.

          5.  Cancellation of Shares.  If the Corporation shall make available,
              ----------------------
at the time and place and in the amount and form provided in this Agreement, the
consideration for the Purchased Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement).  Such shares shall be deemed
purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.

      H.  MISCELLANEOUS PROVISIONS
          ------------------------

          1.  Optionee Undertaking.  Optionee hereby agrees to take whatever
              --------------------
additional action and execute whatever additional documents the Corporation may
deem necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either Optionee or the Purchased Shares
pursuant to the provisions of this Agreement.

          2.  Agreement is Entire Contract.  This Agreement constitutes the
              ----------------------------
entire contract between the parties hereto with regard to the subject matter
hereof.  This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the terms of the Plan.

          3.  Governing Law.  This Agreement shall be governed by, and construed
              -------------
in accordance with, the laws of the State of California without resort to that
State's conflict-of-laws rules.

          4.  Counterparts.  This Agreement may be executed in counterparts,
              ------------
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.

          5.  Successors and Assigns.  The provisions of this Agreement shall
              ----------------------
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and upon Optionee, Optionee's permitted assigns and the legal
representatives, heirs and legatees of Optionee's estate, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.

                                       9
<PAGE>

          IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.

                              LEXAR MEDIA, INC.

                              By:    ________________________

                              Title: ________________________

                              Address:  _____________________

                              _______________________________

                              _______________________________

                              OPTIONEE

                              Address:  _____________________

                              _______________________________


                                      10
<PAGE>

                             SPOUSAL ACKNOWLEDGMENT
                             ----------------------

     The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement.  In consideration of the Corporation's
granting Optionee the right to acquire the Purchased Shares in accordance with
the terms of such Agreement, the undersigned hereby agrees to be irrevocably
bound by all the terms of such Agreement, including (without limitation) the
right of the Corporation (or its assigns) to purchase any Purchased Shares in
which Optionee is not vested at time of his or her cessation of Service.

                              ______________________________
                              OPTIONEE'S SPOUSE

                              Address: _____________________

                              ______________________________


                                      11
<PAGE>

                                   EXHIBIT I
                                   ---------

                      ASSIGNMENT SEPARATE FROM CERTIFICATE

     FOR VALUE RECEIVED ________________ hereby sell(s), assign(s), and
transfer(s) unto Lexar Media, Inc. (the "Corporation"), _______________ (____)
shares of the Common Stock of the Corporation standing in his or her name on the
books of the Corporation represented by Certificate No. ____________ herewith
and do(es) hereby irrevocably constitute and appoint _______________ Attorney to
transfer the said stock on the books of the Corporation with full power of
substitution in the premises.

Dated:  ______________

                              Signature _________________________



Instruction:  Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate.  The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Optionee.
<PAGE>

                                   EXHIBIT II
                                   ----------

                      FEDERAL INCOME TAX CONSEQUENCES AND
                           SECTION 83(b) TAX ELECTION

     I.  Federal Income Tax Consequences and Section 83(b) Election For Exercise
         -----------------------------------------------------------------------
of Non-Statutory Option.  If the Purchased Shares are acquired pursuant to the
-----------------------
exercise of a Non-Statutory Option, as specified in the Grant Notice, then under
Code Section 83, the excess of the Fair Market Value of the Purchased Shares on
the date any forfeiture restrictions applicable to such shares lapse over the
Exercise Price paid for such shares will be reportable as ordinary income on the
lapse date.  For this purpose, the term "forfeiture restrictions" includes the
right of the Corporation to repurchase the Purchased Shares pursuant to the
Repurchase Right.  However, Optionee may elect under Code Section 83(b) to be
taxed at the time the Purchased Shares are acquired, rather than when and as
such Purchased Shares cease to be subject to such forfeiture restrictions.  Such
election must be filed with the Internal Revenue Service within thirty (30) days
after the date of the Agreement.  Even if the Fair Market Value of the Purchased
Shares on the date of the Agreement equals the Exercise Price paid (and thus no
tax is payable), the election must be made to avoid adverse tax consequences in
the future.  The form for making this election is attached as part of this
exhibit.  FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30)-DAY
PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME BY OPTIONEE AS THE
FORFEITURE RESTRICTIONS LAPSE.

     II.  Federal Income Tax Consequences and Conditional Section 83(b) Election
          ----------------------------------------------------------------------
For Exercise of Incentive Option.  If the Purchased Shares are acquired pursuant
--------------------------------
to the exercise of an Incentive Option, as specified in the Grant Notice, then
the following tax principles shall be applicable to the Purchased Shares:

          (i)   For regular tax purposes, no taxable income will be recognized
at the time the Option is exercised.

          (ii)  The excess of (a) the Fair Market Value of the Purchased Shares
on the date the Option is exercised or (if later) on the date any forfeiture
restrictions applicable to the Purchased Shares lapse over (b) the Exercise
Price paid for the Purchased Shares will be includible in Optionee's taxable
income for alternative minimum tax purposes.

          (iii) If Optionee makes a disqualifying disposition of the Purchased
Shares, then Optionee will recognize ordinary income in the year of such
disposition equal in amount to the excess of (a) the Fair Market Value of the
Purchased Shares on the date the Option is exercised or (if later) on the date
any forfeiture restrictions applicable to the Purchased Shares lapse over (b)
the Exercise Price paid for the Purchased Shares. Any additional gain recognized
upon the disqualifying disposition will be either short-
<PAGE>

term or long-term capital gain depending upon the period for which the Purchased
Shares are held prior to the disposition.

          (iv)  For purposes of the foregoing, the term "forfeiture
restrictions" will include the right of the Corporation to repurchase the
Purchased Shares pursuant to the Repurchase Right. The term "disqualifying
disposition" means any sale or other disposition/1/ of the Purchased Shares
within two (2) years after the Grant Date or within one (1) year after the
exercise date of the Option.

          (v)   In the absence of final Treasury Regulations relating to
Incentive Options, it is not certain whether Optionee may, in connection with
the exercise of the Option for any Purchased Shares at the time subject to
forfeiture restrictions, file a protective election under Code Section 83(b)
which would limit (a) Optionee's alternative minimum taxable income upon
exercise and (b) Optionee's ordinary income upon a disqualifying disposition to
the excess of the Fair Market Value of the Purchased Shares on the date the
Option is exercised over the Exercise Price paid for the Purchased Shares.
Accordingly, such election if properly filed will only be allowed to the extent
the final Treasury Regulations permit such a protective election. Page 2 of the
attached form for making the election should be filed with any election made in
connection with the exercise of an Incentive Option.









----------------------
/1/  Generally, a disposition of shares purchased under an Incentive Option
includes any transfer of legal title, including a transfer by sale, exchange or
gift, but does not include a transfer to the Optionee's spouse, a transfer into
joint ownership with right of survivorship if Optionee remains one of the joint
owners, a pledge, a transfer by bequest or inheritance or certain tax free
exchanges permitted under the Code.


                                       2
<PAGE>

                             SECTION 83(b) ELECTION
                             ----------------------

     This statement is being made under Section 83(b) of the Internal Revenue
Code, pursuant to Treas. Reg. Section 1.83-2.

(1)  The taxpayer who performed the services is:

     Name:
          -----------------------------------------------------------
     Address:
             --------------------------------------------------------
     Taxpayer Ident. No.:
                         --------------------------------------------

(2)  The property with respect to which the election is being made is ________
     shares of the common stock of Lexar Media, Inc.

(3)  The property was issued on _____________, _____.

(4)  The taxable year in which the election is being made is the calendar year
     _____.

(5)  The property is subject to a repurchase right pursuant to which the issuer
     has the right to acquire the property at the original purchase price if for
     any reason taxpayer's employment with the issuer is terminated.  The
     issuer's repurchase right lapses in a series of installments over a four
     (4)-year period ending on _____________, 200__.

(6)  The fair market value at the time of transfer (determined without regard to
     any restriction other than a restriction which by its terms will never
     lapse) is $__________ per share.

(7)  The amount paid for such property is $___________ per share.

(8)  A copy of this statement was furnished to Lexar Media, Inc. for whom
     taxpayer rendered the services underlying the transfer of property.

(9)  This statement is executed on _____________, ______.

_______________________           _________________________
Spouse (if any)                   Taxpayer

This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Purchase Agreement.  This
filing should be made by registered or certified mail, return receipt requested.
Optionee must retain
<PAGE>

two (2) copies of the completed form for filing with his or her Federal and
state tax returns for the current tax year and an additional copy for his or her
records.

     The property described in the above Section 83(b) election is comprised of
shares of common stock acquired pursuant to the exercise of an incentive stock
option under Section 422 of the Internal Revenue Code (the "Code").
Accordingly, it is the intent of the Taxpayer to utilize this election to
achieve the following tax results:

     1.  The purpose of this election is to have the alternative minimum taxable
income attributable to the purchased shares measured by the amount by which the
fair market value of such shares at the time of their transfer to the Taxpayer
exceeds the purchase price paid for the shares.  In the absence of this
election, such alternative minimum taxable income would be measured by the
spread between the fair market value of the purchased shares and the purchase
price which exists on the various lapse dates in effect for the forfeiture
restrictions applicable to such shares.  The election is to be effective to the
full extent permitted under the Code.

     2.  Section 421(a)(1) of the Code expressly excludes from income any excess
of the fair market value of the purchased shares over the amount paid for such
shares.  Accordingly, this election is also intended to be effective in the
event there is a "disqualifying disposition" of the shares, within the meaning
of Section 421(b) of the Code, which would otherwise render the provisions of
Section 83(a) of the Code applicable at that time.  Consequently, the Taxpayer
hereby elects to have the amount of disqualifying disposition income measured by
the excess of the fair market value of the purchased shares on the date of
transfer to the Taxpayer over the amount paid for such shares.  Since Section
421(a) presently applies to the shares which are the subject of this Section
83(b) election, no taxable income is actually recognized for regular tax
purposes at this time, and no income taxes are payable, by the Taxpayer as a
result of this election.

THIS PAGE 2 IS TO BE ATTACHED TO ANY SECTION 83(b) ELECTION FILED IN CONNECTION
WITH THE EXERCISE OF AN INCENTIVE STOCK OPTION UNDER THE FEDERAL TAX LAWS.


                                       2
<PAGE>

                                    APPENDIX
                                    --------

     The following definitions shall be in effect under the Agreement:

     A.  Agreement shall mean this Stock Purchase Agreement.
         ---------

     B.  Board shall mean the Corporation's Board of Directors.
         -----

     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 shareholder-
         ---------------------
approved transactions:

         (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 Corporation's assets in complete liquidation or dissolution of the
Corporation.

     F.  Corporation shall mean Lexar Media, Inc., a California corporation.
         -----------

     G.  Disposition Notice shall have the meaning assigned to such term in
         ------------------
Paragraph E.2.

     H.  Exercise Notice shall have the meaning assigned to such term in
         ---------------
Paragraph E.3.

     I.  Exercise Price shall have the meaning assigned to such term in
         --------------
Paragraph A.1.

     J.  Fair Market Value of a share of Common Stock on any relevant date,
         -----------------
prior to the initial public offering of the Common Stock, shall be determined by
the Plan Administrator after taking into account such factors as it shall deem
appropriate.

     K.  First Refusal Right shall mean the right granted to the Corporation in
         -------------------
accordance with Article E.

     L.  Grant Date shall have the meaning assigned to such term in Paragraph
         ----------
A.1.

     M.  Grant Notice shall mean the Notice of Grant of Stock Option pursuant to
         ------------
which Optionee has been informed of the basic terms of the Option.
<PAGE>

     N.  Incentive Option shall mean an option which satisfies the requirements
         ----------------
of Code Section 422.

     O.  Market Stand-Off shall mean the market stand-off restriction specified
         ----------------
in Paragraph C.3.

     P.  1933 Act shall mean the Securities Act of 1933, as amended.
         --------

     Q.  1934 Act shall mean the Securities Exchange Act of 1934, as amended.
         --------

     R.  Non-Statutory Option shall mean an option not intended to satisfy the
         --------------------
requirements of Code Section 422.

     S.  Option shall have the meaning assigned to such term in Paragraph A.1.
         ------

     T.  Option Agreement shall mean all agreements and other documents
         ----------------
evidencing the Option.

     U.  Optionee shall mean the person to whom the Option is granted under the
         --------
Plan.

     V.  Owner shall mean Optionee and all subsequent holders of the Purchased
         -----
Shares who derive their chain of ownership through a Permitted Transfer from
Optionee.

     W.  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.

     X.  Permitted Transfer shall mean (i) a gratuitous transfer of the
         ------------------
Purchased Shares, provided and only if Optionee obtains the Corporation's prior
written consent to such transfer, (ii) a transfer of title to the Purchased
Shares effected pursuant to Optionee's will or the laws of intestate succession
following Optionee's death or (iii) a transfer to the Corporation in pledge as
security for any purchase-money indebtedness incurred by Optionee in connection
with the acquisition of the Purchased Shares.

     Y.  Plan shall mean the Corporation's 1996 Stock Option Plan.
         ----

     Z.  Plan Administrator shall mean either the Board or a committee of the
         ------------------
Board acting in its capacity as administrator of the Plan.

     AA.  Prior Purchase Agreement shall have the meaning assigned to such term
          ------------------------
in Paragraph D.4.

     AB.  Purchased Shares shall have the meaning assigned to such term in
          ----------------
Paragraph A.1.

                                       2
<PAGE>

     AC.  Recapitalization shall mean any stock split, stock dividend,
          ----------------
recapitalization, combination of shares, exchange of shares or other change
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.

     AD.  Reorganization shall mean any of the following transactions:
          --------------

          (i)   a merger or consolidation in which the Corporation is not the
surviving entity,

          (ii)  a sale, transfer or other disposition of all or substantially
all of the Corporation's assets,

          (iii) a reverse merger in which the Corporation is the surviving
entity but in which the Corporation's outstanding voting securities are
transferred in whole or in part to a person or persons different from the
persons holding those securities immediately prior to the merger, or

          (iv)  any transaction effected primarily to change the state in which
the Corporation is incorporated or to create a holding company structure.

     AE.  Repurchase Right shall mean the right granted to the Corporation in
          ----------------
accordance with Article D.

     AF.  SEC shall mean the Securities and Exchange Commission.
          ---

     AG.  Service shall mean the Optionee's performance of services for the
          -------
Corporation (or any Parent or Subsidiary) in the capacity of an employee,
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, a non-employee member
of the board of directors or an independent consultant.

     AH.  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.

     AI.  Target Shares shall have the meaning assigned to such term in
          -------------
Paragraph E.2.

     AJ.  Vesting Schedule shall mean the vesting schedule specified in the
          ----------------
Grant Notice pursuant to which the Optionee is to vest in the Option Shares in a
series of installments over his or her period of Service.

     AK.  Unvested Shares shall have the meaning assigned to such term in
          ---------------
Paragraph D.1.

                                       3
<PAGE>

                               LEXAR MEDIA, INC.
                               -----------------

                    NOTE SECURED BY STOCK PLEDGE AGREEMENT
                    --------------------------------------

$_________________                                           _____________,_____
                                                             Fremont, California

     FOR VALUE RECEIVED, ("Maker") promises to pay to the order of Lexar Media,
Inc. (the "Corporation"), at its corporate offices at 47421 Bayside Parkway,
Fremont, California, the principal sum of
_________________________________________ Dollars ($__________), together with
all accrued interest thereon, upon the terms and conditions specified below.

     1.   Principal.  The principal balance of this Note shall become due and
          ---------
payable in one installment on __________, 200__ (the "Maturity Date").

     2.   Interest.  Interest shall accrue on the unpaid balance outstanding
          --------
from time to time under this Note at the rate of _____% per annum, which
rate is not less than the minimum rate established pursuant to Section 1274(d)
of the Internal Revenue Code of 1986, as amended, compounded ________;
provided, however, that the rate at which interest will accrue on unpaid
--------  -------
principal under this Note will not exceed the highest rate permitted by
applicable law.  Accrued interest shall become due and payable on the Maturity
Date.

     3.   Payment.  Payment shall be made in lawful tender of the United States
          -------
and shall be applied first to the payment of all accrued and unpaid interest and
then to the payment of principal. Prepayment of the principal balance of this
Note, together with all accrued and unpaid interest, may be made in whole or in
part at any time without penalty.

     4.   Events of Acceleration.  The entire unpaid principal balance of this
          ----------------------
Note, together with all accrued and unpaid interest, shall become immediately
due and payable prior to the specified due date of this Note upon the occurrence
of one or more of the following events:

          A.   the failure of the Maker to pay any installment of principal or
     accrued interest under this Note when due and the continuation of such
     default for more than thirty (30) days; or

          B.   the expiration of the thirty (30)-day period following the date
     the Maker ceases for any reason to remain in the Corporation's employ; or

          C.   the insolvency of the Maker, the commission of any act of
     bankruptcy by the Maker, the execution by the Maker of a general assignment
     for the benefit of creditors, the filing by or against the Maker of any
     petition in bankruptcy or any petition for relief under the provisions of
     the Federal bankruptcy act or any other state or Federal law for the relief
     of debtors and the continuation of such petition without dismissal for a
     period of thirty (30) days or more, the appointment of a receiver or
     trustee to take possession of any property or assets of the Maker or the
     attachment of or execution against any property or assets of the Maker;
<PAGE>

          D.   the occurrence of any event of default under the Stock Pledge
     Agreement securing this Note or any obligation secured thereby; or.

          E.   the consolidation or merger of the Corporation with or into
     another corporation or corporations in which holders of the Corporation's
     outstanding shares immediately before such consolidation or merger will
     not, immediately after such consolidation or merger, retain stock
     representing a majority of the voting power of the surviving corporation of
     such consolidation or merger; or the sale of all, or substantially all, of
     the assets of the Corporation.

     5.   Special Acceleration Event.  In the event the Maker sells or
          --------------------------
otherwise transfers for value one or more shares of the Corporation's common
stock purchased with the proceeds of this Note, then the portion of the
principal balance of this Note attributable to the purchase price of those
shares shall become immediately due and payable, together with all accrued and
unpaid interest on that principal portion.

     6.   Employment.  For purposes of applying the provisions of this Note,
          ----------
the Maker shall be considered to remain in the Corporation's employ for so long
as the Maker renders services as a full-time employee of the Corporation, any
successor entity or one or more of the Corporation's fifty percent (50%)-or-more
owned subsidiaries.

     7.   Security.  The proceeds of the loan evidenced by this Note shall be
          --------
applied solely to the payment of the purchase price of shares of the
Corporation's common stock, and payment of this Note shall be secured by a
pledge of those shares with the Corporation pursuant to the Stock Pledge
Agreement to be executed this date by the Maker. The Maker, however, shall
remain personally liable for payment of this Note and assets of the Maker, in
addition to the collateral under the Stock Pledge Agreement, may be applied to
the satisfaction of the Maker's obligations hereunder.

     8.   Collection.  If action is instituted to collect this Note, the Maker
          ----------
promises to pay all costs and expenses (including reasonable attorney fees)
incurred in connection with such action.

     9.   Waiver.  A waiver of any term of this Note, the Stock Pledge
          ------
Agreement or any obligations secured thereby must be made in writing and signed
by a duly-authorized officer of the Corporation and any such waiver shall be
limited to its express terms.  No delay by the Corporation in acting with
respect to the terms of this Note or the Stock Pledge Agreement shall constitute
a waiver of any breach, default, or failure of a condition under this Note, the
Stock Pledge Agreement or the obligations secured thereby.

     The Maker waives presentment, demand, notice of dishonor, notice of default
or delinquency, notice of acceleration, notice of protest and nonpayment, notice
of costs, expenses or losses and interest thereon, notice of interest on
interest and diligence in taking any action to collect any sums owing under this
Note or in proceeding against any of the rights or interests in or to properties
securing payment of this Note.

                                       2
<PAGE>

     10.  Conflicting Agreements.  In the event of any inconsistencies between
          ----------------------
the terms of this Note and the terms of any other document related to the loan
evidenced by the Note, the terms of this Note shall prevail.

     11.  Rule 144 Holding Period.  PURCHASER UNDERSTANDS THAT THE HOLDING
          -----------------------
PERIOD SPECIFIED UNDER RULE 144(d) OF THE SECURITIES AND EXCHANGE COMMISSION
WILL NOT BEGIN TO RUN WITH RESPECT TO SHARES PURCHASED WITH THIS NOTE UNTIL
EITHER (A) THE PURCHASE PRICE OF SUCH SHARES IS PAID IN FULL IN CASH OR BY OTHER
PROPERTY ACCEPTED BY THE COMPANY, OR (B) THIS NOTE IS SECURED BY COLLATERAL,
OTHER THAN THE SHARES THAT HAVE NOT BEEN FULLY PAID FOR IN CASH, HAVING A FAIR
MARKET VALUE AT LEAST EQUAL TO THE AMOUNT OF PURCHASER'S THEN OUTSTANDING
OBLIGATION UNDER THIS NOTE (INCLUDING ACCRUED INTEREST).

     12.  Governing Law.  This Note shall be construed in accordance with the
          -------------
laws of the State of California without resort to that State's conflict-of-
laws rules.


                                           ________________________________
                                           MAKER

                                       3
<PAGE>

                               LEXAR MEDIA, INC.
                               -----------------

                            STOCK PLEDGE AGREEMENT
                            ----------------------

          AGREEMENT made as of this __ day of ________, _____ by and between
Lexar Media, Inc., a California corporation (the "Corporation"), and
____________ ("Pledgor").

RECITALS
--------

          A.  In connection with the purchase of ________ shares of the
Corporation's Common Stock (the "Purchased Shares") on the date of this
Agreement from the Corporation, Pledgor has issued that certain promissory note
(the "Note") dated ___________, _____ payable to the order of the Corporation in
the principal amount of _________________ Dollars ($_____).

          B.  Such Note is secured by the Purchased Shares and other collateral
upon the terms set forth in this Agreement.

          NOW, THEREFORE, it is hereby agreed as follows:

          1.  Grant of Security Interest.  Pledgor hereby grants the Corporation
              --------------------------
a security interests in, and assigns, transfers to and pledges with the
Corporation, the following securities and other property (collectively, the
"Collateral"):

              (i)   the Purchased Shares delivered to and deposited with the
Corporation as collateral for the Note;

              (ii)  any and all new, additional or different securities or other
property subsequently distributed with respect to the Purchased Shares which are
to be delivered to and deposited with the Corporation pursuant to the
requirements of Paragraph 3 of this Agreement;

              (iii) any and all other property and money which is delivered to
or comes into the possession of the Corporation pursuant to the terms of this
Agreement; and

              (iv)  the proceeds of any sale, exchange or disposition of the
property and securities described in subparagraphs (i), (ii) or (iii) above.

          2.  Warranties.  Pledgor hereby warrants that Pledgor is the owner of
              -----------
the Collateral and has the right to pledge the Collateral and that the
Collateral is free from liens, adverse claims and other security interests
(other than those created hereby).

          3.  Duty to Deliver.  Any new, additional or different securities or
              ---------------
other property (other than regular cash dividends) which may now or hereafter
become distributable with respect to the Collateral by reasons of (i) any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the Common Stock as a class without the
Corporation's receipt of consideration or (ii) any merger,
<PAGE>

consolidation or other organization affecting the capital structure of the
Corporation shall, upon receipt by Pledgor be promptly delivered to and
deposited with the Corporation as part of the Collateral hereunder. Any such
securities shall be accompanied by one or more properly-endorsed stock power
assignments.

          4.  Payment of Taxes and Other Charges. Pledgor shall pay, prior to
              -----------------------------------
the delinquency date, all taxes, liens, assessments and other charges against
the Collateral, and in the event of Pledgor's failure to do so, the Corporation
may at its election pay any or all of such taxes and other charges without
contesting the validity or legality thereof. The payments so made shall become
part of the indebtedness secured hereunder and until paid shall bear interest at
the minimum per annum rate, compounded quarterly, required to avoid the
imputation of interest income to the Corporation and compensation income to
Pledgor under the Federal tax laws.

          5.  Shareholder Rights.  So long as there exists no event of default
              -------------------
under Paragraph 10 of this Agreement, Pledgor may exercise all shareholder
voting rights and be entitled to receive any and all regular cash dividends paid
on the Collateral and all proxy statements and other shareholder materials
pertaining to the Collateral.

          6.  Rights and Powers of Corporation.  The Corporation may, without
              --------------------------------
obligation to do so, exercise at any time and from time to time one or more of
the following rights and powers with respect to any or all of the Collateral:

              (i)   subject to the applicable limitations of Paragraph 9, accept
in its discretion other property of Pledgor in exchange for all or part of the
Collateral and release Collateral to Pledgor to the extent necessary to effect
such exchange, and in such event the other property received in the exchange
shall become part of the Collateral hereunder;

              (ii)  perform such acts as are necessary to preserve and protect
the Collateral and the rights, powers ad remedies granted with respect to such
Collateral by this Agreement; and

              (iii) transfer record ownership of the Collateral to the
Corporation or its nominee and receive, endorse and give receipt for, or collect
by legal proceedings or otherwise, dividends or other distributions made or paid
with respect to the Collateral, provided and only if there exists at the time an
                                -----------------
outstanding event of default under Paragraph 10 of this Agreement. Any cash sums
which the Corporation may so receive shall be applied to the payment of the Note
and any other indebtedness secured hereunder, in such order of application as
the Corporation deems appropriate. Any remaining cash shall be paid over to
Pledgor.

          Any action by the Corporation pursuant to the provisions of this
Paragraph 6 may be taken without notice to Pledgor.  Expenses reasonably
incurred in connection with such action shall be payable by Pledgor and form
part of the indebtedness secured hereunder as provided in Paragraph 12.

          7.  Care of Collateral.  The Corporation shall exercise reasonable
              ------------------
care in the custody and preservation of the Collateral.  However, the
Corporation shall have no

                                       2
<PAGE>

obligation to (i) initiate any action with respect to, or otherwise inform
Pledgor of, any conversation, call, exchange right, preemptive right,
subscription right, purchase offer or other right or privilege relating to or
affecting the Collateral, (ii) preserve the rights of Pledgor against adverse
claims or protect the Collateral against the possibility of a decline in market
value or (iii) take any action with respect to the Collateral requested by
Pledgor unless the request is made in writing and the Corporation determines
that the requested action will not unreasonably jeopardize the value of the
Collateral as security for the Note and other indebtedness secured hereunder.

          Subject to the limitations of Paragraph 9, the Corporation may at any
time release and deliver all or part of the Collateral to Pledgor, and the
receipt thereof by Pledgor shall constitute a complete and full acquittance for
the Collateral so released and delivered.  The Corporation shall accordingly be
discharged from any further liability or responsibility for the Collateral, and
the released Collateral shall no longer be subject to the provisions of this
Agreement.

          8.  Transfer of Collateral.  In connection with the transfer or
              ----------------------
assignments of the Note (whether by negotiation, discount or otherwise), the
Corporation may transfer all or any part of the Collateral, and the transferee
shall thereupon succeed to all the rights, powers and remedies granted the
Corporation hereunder with respect to the Collateral so transferred.  Upon such
transfer, the Corporation shall be fully discharged from all liability and
responsibility for the transferred Collateral.

          9.  Release of Collateral.  Provided all indebtedness secured
              ---------------------
hereunder (other than payments not yet due and payable under the Note) shall at
the time have been paid in full and there does not otherwise exist any event of
default under Paragraph 10, the Purchased Shares, together with any additional
Collateral which may hereafter be pledged and deposited hereunder, shall be
released from pledge and returned to Pledgor in accordance with the following
provisions:

              (i)  Upon payment or prepayment of principal under the Note,
together with payment of all accrued interest to date, one or more of the
Purchased Shares held as Collateral hereunder shall (subject to the applicable
limitations of Paragraph 9(iii) and 9(v) below) be released at the time of such
payment or prepayment. The number of the shares to be so released shall be equal
to the number obtained by multiplying (i) the total number of Purchased Shares
held under this Agreement at the time of the payment or prepayment, by (ii) a
fraction, the numerator of which shall be the amount of the principal paid or
prepaid and the denominator of which shall be the unpaid principal balance of
the Note immediately prior to such payment or prepayment. In no event, however,
shall any fractional shares be released.

              (ii) Any additional Collateral which may hereafter be pledged and
deposited with the Corporation (pursuant to the requirements of Paragraph 3)
with respect to the Purchased Shares shall be released at the same time the
particular shares of Common Stock to which the additional Collateral relates are
to be released in accordance with the applicable provisions of Paragraph 9(i).

                                       3
<PAGE>

              (iii)  Under no circumstances, however, shall any Purchased Shares
or any other Collateral be released if previously applied to the payment of any
indebtedness secured hereunder. In addition, in no event shall any Purchased
Shares or other Collateral be released pursuant to the provisions of Paragraph
9(i) or 9(ii) if, and to the extent, the fair market value of the Common Stock
and all other Collateral which would otherwise remain in pledge hereunder after
such release were effected would be less than the unpaid principal and accrued
interest under the Note.

              (iv)   For all valuation purposes under this Agreement, the fair
market value per share of Common Stock on any relevant date shall be determined
in accordance with the following provisions:

                      (A)  If the Common Stock is at the time traded on the
Nasdaq National Market, the fair market value shall be the closing selling price
per share of Common Stock on the date in question, as such prices are reported
by the National Association of Securities Dealers on its Nasdaq system or any
successor system. If there is no reported closing selling price for the Common
Stock on the date in question, then the closing selling price on the last
preceding date for which such quotation exists shall be determinative of fair
market value.

                      (B)  If the Common Stock is at the time listed on the
American Stock Exchange or the New York 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 securities 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 reported sale of Common Stock on
such exchange on the date in question, then the fair market value shall be the
closing selling price on the exchange on the last preceding date for which such
quotation exists.

                      (C)  If the Common Stock is at the time neither listed on
any securities exchange nor traded on the Nasdaq National Market, the fair
market value shall be determined by the Corporation's Board of Directors after
taking into account such factors as the Board shall deem appropriate.

               (v)   In the event the Collateral becomes in whole or in part
comprised of "margin securities" within the meaning of Section 207.2(i) of
Regulation G of the Federal Reserve Board, then no Collateral shall thereafter
be substituted for any Collateral under the provisions of Paragraph 6(i) or be
released under Paragraph 9(i) or (ii), unless there is compliance with each of
the following additional requirements:

                      (A)  The substitution or release must not increase the
amount by which the indebtedness secured hereunder at the time of such
substitution or release exceeds the maximum loan value (as defined below) of the
Collateral immediately prior to such substitution or release.

                      (B)  The substitution or release must not cause the amount
of indebtedness secured hereunder at the time of such substitution or release to
exceed the maximum loan value of the Collateral remaining after such
substitution or release is effected.

                                       4
<PAGE>

                        (C)  For purpose of this Paragraph 9(v), the maximum
loan value of each item of Collateral shall be determined on the day the
substitution or release is to be effected and shall, in the case of the shares
of Common Stock and any additional Collateral (other than margin securities),
equal the good faith loan value thereof (as defined in Section 207.2(e)(1) of
Regulation G) and shall, in the case of all margin securities (other than the
Common Stock), equal fifty percent (50%) of the current market value of such
securities.

          10.  Events of Default.  The occurrence of one or more of the
               -----------------
following events shall constitute an event of default under this Agreement:

               (i)   the failure of Pledgor to pay, when due under the Note, any
installment of principal or accrued interest; or

               (ii)  the occurrence of any other acceleration event specified in
the Note; or

               (iii) the failure of Pledgor to perform any obligation
imposed upon Pledgor by reason of this Agreement; or

               (iv)  the breach of any warranty of Pledgor contained in this
Agreement.

          Upon the occurrence of any such event of default, the Corporation may,
at its election, declare the Note and all other indebtedness secured hereunder
to become immediately due and payable and may exercise any or all of the rights
and remedies granted to a secured party under the provisions of the California
Uniform Commercial Code (as now or hereafter in effect), including (without
limitation) the power to dispose of the Collateral by public or private sale or
to accept the Collateral in full payment of the Note and all other indebtedness
secured hereunder.

          Any proceeds realized from the disposition of the Collateral pursuant
to the foregoing power of sale shall be applied first to the payment of expenses
incurred by the Corporation in connection with the disposition, then to the
payment of the Note and finally to any other indebtedness secured hereunder.
Any surplus proceeds shall be paid over to Pledgor.  However, in the event such
proceeds prove insufficient to satisfy all obligations of Pledgor under the
Note, then Pledgor shall remain personally liable for the resulting deficiency.

          11.  Other Remedies.  The rights, powers and remedies granted to the
               --------------
Corporation pursuant to the provisions of this Agreement shall be in addition to
all rights, powers and remedies granted to the Corporation under any statute or
rule of law.  Any forbearance, failure or delay by the Corporation in exercising
any right, power or remedy under this Agreement shall not be deemed to be a
waiver of such right, power or remedy.  Any single or partial exercise of any
right, power or remedy under this Agreement shall not preclude the further
exercise thereof, and every right, power and remedy of the Corporation under
this Agreement shall continue in full force and effect unless such right, power
or remedy is specifically waived by an instrument executed by the Corporation.

                                       5
<PAGE>

          12.  Costs and Expenses.  All costs and expenses (including reasonable
               ------------------
attorneys fees) incurred by the Corporation in the exercise or enforcement of
any right, power or remedy granted it under this Agreement shall become part of
the indebtedness secured hereunder and shall constitute a personal liability of
Pledgor payable immediately upon demand and bearing interest until paid at the
minimum per annum rate, compounded quarterly, required to avoid the imputation
of interest income to the Corporation and compensation income to Pledgor under
the Federal tax laws.

          13.  Applicable Law.  This Agreement shall be governed by and
               --------------
construed in accordance with the laws of the State of California without resort
to that State's conflict-of-laws rules.

          14.  Successors.  This Agreement shall be binding upon the Corporation
               ----------
and its successors and assigns and upon Pledgor and the executors, heirs and
legatees of Pledgor's estate.

          15.  Severability.  If any provision of this Agreement is held to be
               ------------
invalid under applicable law, then such provision shall be ineffective only to
the extent of such invalidity, and neither the remainder of such provision nor
any other provisions of this Agreement shall be affected thereby.

          IN WITNESS WHEREOF, this Agreement has been executed by Pledgor and
the Corporation on this ____ day of _____________, _____.


LEXAR MEDIA, INC.                           ____________________________________
                                                           PLEDGOR

By: ______________________________          Address:____________________________

Title:____________________________                  ____________________________

                                       6
<PAGE>

                      ASSIGNMENT SEPARATE FROM CERTIFICATE



          FOR VALUE RECEIVED _____________ hereby sell(s), assign(s) and
transfer(s) unto Lexar Media, Inc. (the "Corporation"), ________________________
(_______) shares of the Common Stock of the Corporation standing in his or her
name on the books of the Corporation represented by Certificate No. _______
herewith and do(es) hereby irrevocably constitute and appoint
_____________________ Attorney to transfer the said stock on the books of the
Corporation with full power of substitution in the premises.

Dated:  ______________________, ____



                                  Signature:   _______________________











Instruction:  Please do not fill in any blanks other than the signature line.
              --------------------------------------------------------------
Please sign exactly as you would like your name to appear on the issued stock
certificate.  The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Optionee.