Document:

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                                                                     EXHIBIT 4.3

                              AMENDMENT NO. 2 TO
                          INVESTORS RIGHTS AGREEMENT

     This AMENDMENT NO. 2 TO INVESTORS RIGHTS AGREEMENT dated March 21, 2000
(this "Amendment") amends that certain Investors Right Agreement, which is
       ---------
attached hereto as Exhibit A, dated as of September 28, 1999, by and among Lexar
                   ---------
Media, Inc., a California corporation (the "Company"), certain existing
                                            -------
shareholders of the Company listed on Schedule 1 thereto and certain investors
listed on Schedule 2 thereto, as amended by that certain Amendment No. 1 to
Investors Rights Agreement, which is attached hereto as Exhibit B, dated as of
                                                        ---------
December 18, 1999, (the "Investors Rights Agreement").  The capitalized terms
                         --------------------------
not otherwise defined herein have the respective meanings given to them in the
Investors Rights Agreement.

                                   RECITALS

     A.   Section 7.1 of the Investor Rights Agreement states in part that any
          term or provision of the Investors Rights Agreement may be amended by
          a writing signed by the Company and holders of at least two-thirds
          (2/3rds) of the Registrable Common.

     B.   The undersigned parties include the Company and the holders of at
          least two-thirds (2/3rds) of the Registrable Common.

                                  AGREEMENTS

     NOW, THEREFORE, in consideration of the mutual promises made herein and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree to amend the Investors Rights
Agreement as follows:

     1.   Section 1.11 of the Investors Rights Agreement is amended by adding a
reference to the Convertible Promissory Note (the "Sony Note") issued pursuant
to that certain Convertible Note and Warrant Purchase Agreement, dated as of
even date herewith (the "Purchase Agreement"), by and between the Company and
Sony Electronics, Inc. ("Sony").  Section 1.11 shall read in its entirety as
follows:

          1.11.  "Registrable Common" means (a) any shares of Common Stock which
                  ------------------
     have been issued or are issuable upon the conversion of the Series A
     Preferred, Series B Preferred, Series C Preferred, Series D Preferred or
     Series E Preferred, (b) any shares of Common Stock which have been issued
     or are issuable upon exercise of the Warrants, the Series C Warrant, the
     Series E Warrant or the Bridge Loan Warrant, (c) any shares of Common Stock
     which have been issued or are issuable upon conversion of the convertible
     promissory note issued to Sony Electronics, Inc. ("Sony") on or about March
     21, 2000 and (d) any share of Common Stock issued as a dividend, stock
     split, reclassification,
<PAGE>

     recapitalization or other distribution with respect to or in exchange for
     replacement of any Registrable Common, and, and, provided, however, that
     shares of Common Stock shall no longer be Registrable Common when they
     shall have been effectively registered under the Securities Act and sold by
     the Holder thereof in accordance with such registration or sold by the
     Holder pursuant to Rule 144.

     2.   Section 1.22 of the Investors Rights Agreement is amended by adding a
reference to the warrant issued to Sony pursuant to the Purchase Agreement (the
"Sony Warrant").  Section 1.22 shall read in its entirety as follows:

          1.22. "Warrants" means (a) the warrants to purchase 125,000 shares of
                 --------
     the Company's Common Stock granted to certain of the Investors as of
     January 16, 1998, (b) the warrant granted to SMART Modular Technologies,
     Inc. as of September 28, 1999 to purchase up to a certain number of shares
     of the Company's Common Stock as set forth in the warrant, (c) the warrant
     to purchase up to 30,000 shares of the Company's Common Stock granted to
     Fenwick & West LLP as of December 8, 1999 and (d) the warrant to purchase
     shares of the Company's Common Stock granted to Sony on or about March 21,
     2000.

     3.   Sections 4.2 (iv) and 4.2 (vii) of the Investors Rights Agreement are
amended by adding a reference to the Sony Note and the Sony Warrant to exclude
the Sony Note, the Sony Warrant and the Common Stock issuable upon conversion of
the Sony Note and the Sony Warrant from the definition of "New Securities" that
are subject to each Holders' right of first refusal.  Sections 4.2 (iv) and 4.2
(vii) shall read in their entirety as follows:

          (iv)  the Warrants, the Series C Warrants, the Series E Warrants, the
     Bridge Loan Warrants or any securities issuable upon exercise of the
     Warrants, the Series C Warrants, the Series E Warrants and the Bridge Loan
     Warrants (the "Warrant Securities") or any securities issuable upon the
     conversion of any Warrant Securities;

          (vii) the convertible promissory note issued by the Company to Sony
     Electronics, Inc. on or about March 21, 2000 in the principal amount of
     $2,000,000, the convertible promissory note issued by the Company on or
     about May 13, 1999 in the principal amount of $150,000, the convertible
     promissory notes issued by the Company on or about August 6, 1999 in the
     aggregate principal amount of $2,285,449.38 or any securities issuable upon
     the conversion of any of such notes (the "Note Securities") or any
     securities issuable upon the conversion of any Note Securities;

     4.   Sections 5.1.1, 5.1.2, 5.1.4 and 5.2.3 of the Investors Rights
Agreement are amended by adding a reference to the Registrable Common issued or
issuable upon conversion of the Series E Preferred to include the Holders of
such Registrable Common as Holders who can initiate a Registration Request
pursuant to Section 5.1.  Sections 5.1.1, 5.1.2, 5.1.4 and 5.2.3 shall read in
their entirety as follows:
<PAGE>

          5.1.1. If, at any time after the earlier of: (i) six (6) months after
     the Company's initial public offering of its Common Stock or (ii) June 1,
     2001, the Company shall receive a written request for registration under
     the Securities Act from (a) the record Holder or Holders of an aggregate of
     at least a majority of the then Registrable Common not previously
     registered under the Securities Act and sold or (b) the record Holder or
     Holders of an aggregate of at least one-fifth (1/5th) of the then
     Registrable Common issued upon conversion of the Series E Preferred;
     provided that at least 500,000 shares of the Registrable Common issued upon
     conversion of the Series E Preferred remain outstanding (a "Registration
     Request"):

                 (a) the Company shall promptly give written notice to all other
          record Holders of Registrable Common not previously registered under
          the Securities Act and sold that such registration is to be effected
          ("Registration Notice"); and

                 (b) subject to the limitations and requirements set forth in
          this Section 5.1, the Company shall use its best efforts to prepare
          and file a registration statement under the Securities Act, covering
          the Registrable Common which is the subject of the Registration
          Request and such additional Registrable Common for which it has
          received written requests to register by such other record Holders:
          (i) within twenty (20) days after the delivery of the Registration
          Notice if the Company is subject to the reporting requirements of the
          Exchange Act or (ii) within forty-five (45) days after the delivery of
          the Registration Notice if the Company is not subject to such
          reporting requirements; and the Company shall use its best efforts to
          cause such registration statement to become effective as soon as is
          practicable after receipt of the Registration Request, but not later
          than sixty (60) days after receipt of such request.

          5.1.2. The Company shall be obligated (a) to proceed with filing the
     Registration Statement only if the anticipated gross offering proceeds
     based upon the public offering price per share proposed by the underwriters
     is at least $5,000,000, (b) to prepare, file and cause to become effective
     no more than two (2) registration statements pursuant to Registration
     Requests made by Holders of at least a majority of the Registrable Common
     under this Section 5.1 and no more than one (1) additional registration
     statement pursuant to a Registration Request made by the Holders of at
     least one-fifth (1/5th) of the Registrable Common issued or issuable upon
     conversion of the Series E Preferred under this Section 5.1 and (c)
     notwithstanding the provisions of Subsection 5.1.2(b) above, to prepare,
     file and cause to become effective no more than one (1) registration
     statement pursuant to a Registration Request made under this Section 5.1
     during any six-month period.

          5.1.4. If the Holders submitting the Registration Request (the
     "Initiating Holders") intend to distribute the Registrable Common covered
     by such request
<PAGE>

     by means of an underwriting, the Registration Request shall so indicate and
     the Company shall include such information in the Registration Notice. A
     majority in interest of the Initiating Holders shall select the
     underwriter, with the approval of the Company, which approval shall not be
     unreasonably withheld. Notwithstanding any other provision of this Section
     5.1, if the managing underwriter advises the Initiating Holders in writing
     that marketing factors require reducing the number of shares to be
     underwritten, then the number of shares of Registrable Common included in
     the underwriting shall be reduced pro rata among all participating Holders
     in proportion (as nearly as practicable) to the amount of Registrable
     Common owned by each participating Holder; provided, that, if in connection
     with a Registration Request made by the Holders of the Registrable Common
     issued or issuable upon conversion of the Series E Preferred, Registrable
     Common is being included in the underwriting pursuant to a Holder's
     incidental registration rights under Section 5.2, such reduction shall be
     made: (i) first, from the number of Registrable Common requested to be
     included in the underwriting pursuant to Section 5.2, on a pro rata basis,
     based on the number of Registrable Common requested to be included in the
     registration by Holders pursuant to Section 5.2, and (ii) second, from the
     number of Registrable Common requested to be included in such underwriting
     by the applicable Initiating Holders, on a pro rata basis, based on the
     number of Registrable Common requested to be included in the registration
     by such Initiating Holders; provided, however that such reduction shall be
                                 --------  -------
     made only if all other securities (other than Registrable Common) to be
     included already have been entirely excluded from the underwriting.

          5.2.3.  If in the good faith judgment of the managing underwriter of
     such public offering, marketing factors require the number of securities
     otherwise to be included in the underwritten public offering to be reduced
     or excluded such number may be reduced pro rata (by number of shares) or
     excluded among the Holders thereof requesting such registration; provided,
     however, that, (i) in connection with an offering initiated by the Company,
     such reduction shall be made: (a) first, from the number of securities
     requested to be included in such offering by Holders exercising incidental
     registration rights pursuant to this Section 5.2, on a pro rata basis,
     based on the number of Registrable Common requested to be included in the
     offering by such Holders and (b) second, from the number of securities to
     be offered for the account of the Company and (ii) in connection with a
     Registration Request made by the Holders of the Registrable Common issued
     or issuable upon conversion of the Series E Preferred, such reduction shall
     be made: (a) first, from the number of securities requested to be included
     in such offering by Holders exercising incidental registration rights
     pursuant to this Section 5.2, on a pro rata basis, based on the number of
     Registrable Common requested to be included in the offering by such Holders
     and (b) second, from the number of securities to be offered by the
     Initiating Holders, on a pro rata basis, based on the number of Registrable
     Common requested to be included in the offering by such Initiating Holders
     under Section 5.1 or 5.3; and, provided, further, that the number of
                                    --------  -------
     Registrable Common included in any such registration is not reduced below
     10 percent (10%) of the shares included in the
<PAGE>

     registration, except for a registration relating to the Company's initial
     public offering, from which all Registrable Common may be excluded.

     5.   Section 7.1 of the Investors Rights Agreement is amended by adding a
reference to the Registrable Common issued or issuable upon conversion of the
Series E Preferred to include the Holders of such Registrable Common as Holders
who can initiate a Registration Request pursuant to Section 5.1.1.  The second
sentence of Section 7.1 shall read in its entirety as follows:

     Notwithstanding the previous sentence and in lieu of the vote required
     therein, no such amendment or waiver shall (i) adversely affect the rights
     of a Holder, to (A) attend Board meetings pursuant to Section 2.5 or (B)
     receive expense reimbursement pursuant to Section 3.3 without the written
     consent of the affected Holder, or (ii) adversely affect the rights of the
     Holders of Registrable Common issued or issuable upon conversion of the
     Series E Preferred to make a Registration Request pursuant to Sections
     5.1.1 and 5.1.2 without the written consent of four-fifths (4/5ths) of the
     Series E Preferred.

     6.   Except as expressly modified by this Amendment, all terms of the
Investors Rights Agreement shall remain in full force and effect.
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.

COMPANY:                              LEXAR MEDIA, INC.

                                      By:_______________________________________
                                         Name:  Mr. John Reimer
                                         Title: President and Chief Executive
                                                Officer

SHAREHOLDERS:                         __________________________________________
                                      John Reimer

                                      __________________________________________
                                      Petro Estakhri

                                      __________________________________________
                                      Mahmud ("Mike") Assar

        SIGNATURE PAGE TO AMENDMENT NO. 2 TO INVESTORS RIGHTS AGREEMENT
<PAGE>

INVESTORS:                              GE CAPITAL EQUITY INVESTMENTS, INC.
                                        a Delaware corporation

                                        By:_____________________________________
                                           Name:________________________________
                                           Title:_______________________________

        SIGNATURE PAGE TO AMENDMENT NO. 2 TO INVESTORS RIGHTS AGREEMENT
<PAGE>

                                        ST. PAUL VENTURE CAPITAL IV, LLC

                                        By:_____________________________________
                                           Name:________________________________
                                           Title:_______________________________

                                        ST. PAUL VENTURE CAPITAL V, LLC

                                        By:_____________________________________
                                           Name:________________________________
                                           Title:_______________________________

                                        ST. PAUL VENTURE CAPITAL AFFILIATES
                                        FUND I, LLC

                                        By St. Paul Venture Capital, Inc.,
                                        Its Manager

                                        By:_____________________________________
                                           Name:________________________________
                                           Title:_______________________________

        SIGNATURE PAGE TO AMENDMENT NO. 2 TO INVESTORS RIGHTS AGREEMENT
<PAGE>

                                             APV TECHNOLOGY PARTNERS II, L.P.

                                             By APV Management Co. II, LLC,
                                             Its Managing General Partner

                                             By:________________________________
                                                Name:___________________________
                                                Title:__________________________

        SIGNATURE PAGE TO AMENDMENT NO. 2 TO INVESTORS RIGHTS AGREEMENT
<PAGE>

                                             THE JOHN TU AND MARY TU TRUST,
                                             DATED JUNE 16, 1995

                                             By:________________________________
                                                Name: John Tu
                                                Title: Trustee

        SIGNATURE PAGE TO AMENDMENT NO. 2 TO INVESTORS RIGHTS AGREEMENT
<PAGE>

                                        DECLARATION OF TRUST OF DAVID SUN AND
                                        DIANA SUN, DATED FEBRUARY 26, 1986

                                        By:_____________________________________
                                           Name: David Sun
                                           Title: Co-Trustee

                                        By:_____________________________________
                                           Name: Diana Sun
                                           Title: Co-Trustee

        SIGNATURE PAGE TO AMENDMENT NO. 2 TO INVESTORS RIGHTS AGREEMENT

<PAGE>

                                             THOMVEST HOLDINGS, INC.

                                             By:________________________________
                                                Name:___________________________
                                                Title:__________________________

        SIGNATURE PAGE TO AMENDMENT NO. 2 TO INVESTORS RIGHTS AGREEMENT
<PAGE>

                                             TOSHIBA AMERICA ELECTRONIC
                                             COMPONENTS, INC.

                                             By:________________________________
                                                Name:___________________________
                                                Title:__________________________

        SIGNATURE PAGE TO AMENDMENT NO. 2 TO INVESTORS RIGHTS AGREEMENT
<PAGE>

                                             JOHN A. ROLLWAGEN REVOCABLE TRUST
                                             U/A DATED SEPTEMBER 13, 1991

                                             By:________________________________
                                                Name:___________________________
                                                Title:__________________________

        SIGNATURE PAGE TO AMENDMENT NO. 2 TO INVESTORS RIGHTS AGREEMENT
<PAGE>

                                             F&W INVESTMENTS 1997

                                             By:________________________________
                                                Name:___________________________
                                                Title:__________________________

                                             FENWICK & WEST LLP

                                             By:________________________________
                                                Name:___________________________
                                                Title:__________________________

        SIGNATURE PAGE TO AMENDMENT NO. 2 TO INVESTORS RIGHTS AGREEMENT
<PAGE>

                                             1267104 ONTARIO, LTD.

                                             By:________________________________
                                                Name:___________________________
                                                Title:__________________________

        SIGNATURE PAGE TO AMENDMENT NO. 2 TO INVESTORS RIGHTS AGREEMENT
<PAGE>

                                             SIP GLOBAL I, L.P.

                                             By:________________________________
                                                Name:___________________________
                                                Title:__________________________

        SIGNATURE PAGE TO AMENDMENT NO. 2 TO INVESTORS RIGHTS AGREEMENT
<PAGE>

                                             NORWEST BANK MINNESOTA, N.A.

                                             By:________________________________
                                                Name:___________________________
                                                Title:__________________________

        SIGNATURE PAGE TO AMENDMENT NO. 2 TO INVESTORS RIGHTS AGREEMENT
<PAGE>

                                             SUNAMERICA, INC.,
                                             as beneficial owner

                                             By:________________________________
                                                Name:___________________________
                                                Title:__________________________

        SIGNATURE PAGE TO AMENDMENT NO. 2 TO INVESTORS RIGHTS AGREEMENT
<PAGE>

                                             VAN WAGONER CAPITAL MANAGEMENT

                                             By:________________________________
                                                Name:___________________________
                                                Title:__________________________

        SIGNATURE PAGE TO AMENDMENT NO. 2 TO INVESTORS RIGHTS AGREEMENT
<PAGE>

                                             OLYMPUS OPTICAL CO., LTD.

                                             By:________________________________
                                                Name:___________________________
                                                Title:__________________________

        SIGNATURE PAGE TO AMENDMENT NO. 2 TO INVESTORS RIGHTS AGREEMENT
<PAGE>

                                             MELLON VENTURES, L.P.

                                             By:________________________________
                                                Name:___________________________
                                                Title:__________________________

        SIGNATURE PAGE TO AMENDMENT NO. 2 TO INVESTORS RIGHTS AGREEMENT
<PAGE>

                                             LAGUNITAS PARTNER, L.P.

                                             By:________________________________
                                                Name:___________________________
                                                Title:__________________________

                                             GRUBER & McBAINE INTERNATIONAL

                                             By:________________________________
                                                Name:___________________________
                                                Title:__________________________

                                             ___________________________________
                                                JON D. GRUBER

        SIGNATURE PAGE TO AMENDMENT NO. 2 TO INVESTORS RIGHTS AGREEMENT<PAGE>
                                                                    EXHIBIT 10.3

                               LEXAR MEDIA, INC.

                          2000 EQUITY INCENTIVE PLAN

                          As Adopted January 21, 2000

     1.   PURPOSE.  The purpose of this Plan is to provide incentives to
          -------
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent and
Subsidiaries, by offering them an opportunity to participate in the Company's
future performance through awards of Options, Restricted Stock and Stock
Bonuses.  Capitalized terms not defined in the text are defined in Section 23.

     2.   SHARES SUBJECT TO THE PLAN.
          --------------------------

          2.1  Number of Shares Available.  Subject to Sections 2.2 and 18, the
               --------------------------
total number of Shares reserved and available for grant and issuance pursuant to
this Plan will be 8,000,000 Shares plus Shares that are subject to: (a) issuance
upon exercise of an Option but cease to be subject to such Option for any reason
other than exercise of such Option; (b) an Award granted hereunder but are
forfeited or are repurchased by the Company at the original issue price; and (c)
an Award that otherwise terminates without Shares being issued.  In addition,
any authorized shares not issued or subject to outstanding grants under the
Company's 1996 Stock Option/Stock Issuance Plan (the "Prior Plan") on the
Effective Date (as defined below) and any shares issued under the Prior Plan
that are forfeited or repurchased by the Company or that are issuable upon
exercise of options granted pursuant to the Prior Plan that expire or become
unexercisable for any reason without having been exercised in full, will no
longer be available for grant and issuance under the Prior Plan, but will be
available for grant and issuance under this Plan.  In addition, on each January
1, the aggregate number of Shares reserved and available for grant and issuance
pursuant to this Plan will be increased automatically by a number of Shares
equal to 5% of the total outstanding shares of the Company as of the immediately
preceding December 31, provided that no more than 50,000,000 shares shall
be issued as ISOs (as defined in Section 5 below).  At all times the Company
shall reserve and keep available a sufficient number of Shares as shall be
required to satisfy the requirements of all outstanding Options granted under
this Plan and all other outstanding but unvested Awards granted under this Plan.

          2.2  Adjustment of Shares.  In the event that the number of
               --------------------
outstanding shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under this Plan, (b) the
number of Shares that may be granted pursuant to Sections 3 and 9 below, (c) the
Exercise Prices of and number of Shares subject to outstanding Options, and (d)
the number of Shares subject to other outstanding Awards will be proportionately
adjusted, subject to any required action by the Board or the stockholders of the
Company and compliance with applicable securities laws; provided, however, that
                                                        --------  -------
fractions of a Share will not be issued but will either be replaced by a cash
payment equal to the Fair Market Value of such fraction of a Share or will be
rounded up to the nearest whole Share, as determined by the Committee.

     3.   ELIGIBILITY.  ISOs (as defined in Section 5 below) may be granted only
          -----------
to employees (including officers and directors who are also employees) of the
Company or of a Parent or Subsidiary of the Company.  All other Awards may be
granted to employees, officers, directors, consultants, independent contractors
and advisors of the Company or any Parent or Subsidiary of the Company; provided
                                                                        --------
such consultants, contractors and advisors render bona fide services not in
connection with the offer and sale of securities in a capital-raising
transaction.  No person will be eligible to receive more than 2,000,000 Shares
in any calendar year under this Plan pursuant to the grant of Awards hereunder,
other than new employees of the Company or of a Parent or Subsidiary of the
Company (including new employees who are also officers and directors of the
Company or any Parent or Subsidiary of the Company), who are eligible to receive
up to a maximum of 3,000,000 Shares in the calendar year in which they commence
their employment.  A person may be granted more than one Award under this Plan.

     4.   ADMINISTRATION.
          --------------
<PAGE>

                                                               Lexar Media, Inc.
                                                      2000 Equity Incentive Plan

          4.1  Committee Authority.  This Plan will be administered by the
               -------------------
Committee or by the Board acting as the Committee.  Except for automatic grants
to Outside Directors pursuant to Section 9 hereof, and subject to the general
purposes, terms and conditions of this Plan, and to the direction of the Board,
the Committee will have full power to implement and carry out this Plan.  Except
for automatic grants to Outside Directors pursuant to Section 9 hereof, the
Committee will have the authority to:

          (a)  construe and interpret this Plan, any Award Agreement and any
               other agreement or document executed pursuant to this Plan;

          (b)  prescribe, amend and rescind rules and regulations relating to
               this Plan or any Award;

          (c)  select persons to receive Awards;

          (d)  determine the form and terms of Awards;

          (e)  determine the number of Shares or other consideration subject to
               Awards;

          (f)  determine whether Awards will be granted singly, in combination
               with, in tandem with, in replacement of, or as alternatives to,
               other Awards under this Plan or any other incentive or
               compensation plan of the Company or any Parent or Subsidiary of
               the Company;

          (g)  grant waivers of Plan or Award conditions;

          (h)  determine the vesting, exercisability and payment of Awards;

          (i)  correct any defect, supply any omission or reconcile any
               inconsistency in this Plan, any Award or any Award Agreement;

          (j)  determine whether an Award has been earned; and

          (k)  make all other determinations necessary or advisable for the
               administration of this Plan.

          4.2  Committee Discretion.  Except for automatic grants to Outside
               --------------------
Directors pursuant to Section 9 hereof, any determination made by the Committee
with respect to any Award will be made in its sole discretion at the time of
grant of the Award or, unless in contravention of any express term of this Plan
or Award, at any later time, and such determination will be final and binding on
the Company and on all persons having an interest in any Award under this Plan.
The Committee may delegate to one or more officers of the Company the authority
to grant an Award under this Plan to Participants who are not Insiders of the
Company.

     5.   OPTIONS.  The Committee may grant Options to eligible persons and will
          -------
determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISO") or Nonqualified Stock Options ("NQSOs"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:

          5.1  Form of Option Grant.  Each Option granted under this Plan will
               --------------------
be evidenced by an Award Agreement which will expressly identify the Option as
an ISO or an NQSO ("Stock Option Agreement"), and, except as otherwise required
by the terms of Section 9 hereof, will be in such form and contain such
provisions (which need not be the same for each Participant) as the Committee
may from time to time approve, and which will comply with and be subject to the
terms and conditions of this Plan.

          5.2  Date of Grant.  The date of grant of an Option will be the date
               -------------
on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee.  The Stock Option

                                       2
<PAGE>

                                                               Lexar Media, Inc.
                                                      2000 Equity Incentive Plan

Agreement and a copy of this Plan will be delivered to the Participant within a
reasonable time after the granting of the Option.

          5.3  Exercise Period.  Options may be exercisable within the times or
               ---------------
upon the events determined by the Committee as set forth in the Stock Option
Agreement governing such Option; provided, however, that no Option will be
                                 --------  -------
exercisable after the expiration of ten (10) years from the date the Option is
granted; and provided further that no ISO granted to a person who directly or by
             ----------------
attribution owns more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or of any Parent or Subsidiary of the
Company ("Ten Percent Stockholder") will be exercisable after the expiration of
five (5) years from the date the ISO is granted.  The Committee also may provide
for Options to become exercisable at one time or from time to time, periodically
or otherwise, in such number of Shares or percentage of Shares as the Committee
determines.

          5.4  Exercise Price.  The Exercise Price of an Option will be
               --------------
determined by the Committee when the Option is granted and may be not less than
85% of the Fair Market Value of the Shares on the date of grant; provided that:
(i) the Exercise Price of an ISO will be not less than 100% of the Fair Market
Value of the Shares on the date of grant; and (ii) the Exercise Price of any ISO
granted to a Ten Percent Stockholder will not be less than 110% of the Fair
Market Value of the Shares on the date of grant.  Payment for the Shares
purchased may be made in accordance with Section 8 of this Plan.

          5.5  Method of Exercise.  Options may be exercised only by delivery to
               ------------------
the Company of a written stock option exercise agreement  (the "Exercise
Agreement") in a form approved by the Committee (which need not be the same for
each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price for the number of Shares being
purchased.

          5.6  Termination.  Notwithstanding the exercise periods set forth in
               -----------
the Stock Option Agreement, exercise of an Option will always be subject to the
following:

          (a)  If the Participant is Terminated for any reason except death or
               Disability, then the Participant may exercise such Participant's
               Options only to the extent that such Options would have been
               exercisable upon the Termination Date no later than three (3)
               months after the Termination Date (or such shorter or longer time
               period not exceeding five (5) years as may be determined by the
               Committee, with any exercise beyond three (3) months after the
               Termination Date deemed to be an NQSO), but in any event, no
               later than the expiration date of the Options.

          (b)  If the Participant is Terminated because of Participant's death
               or Disability (or the Participant dies within three (3) months
               after a Termination other than for Cause or because of
               Participant's Disability), then Participant's Options may be
               exercised only to the extent that such Options would have been
               exercisable by Participant on the Termination Date and must be
               exercised by Participant (or Participant's legal representative
               or authorized assignee) no later than twelve (12) months after
               the Termination Date (or such shorter or longer time period not
               exceeding five (5) years as may be determined by the Committee,
               with any such exercise beyond (a) three (3) months after the
               Termination Date when the Termination is for any reason other
               than the Participant's death or Disability, or (b) twelve (12)
               months after the Termination Date when the Termination is for
               Participant's death or Disability, deemed to be an NQSO), but in
               any event no later than the expiration date of the Options.

                                       3
<PAGE>

                                                               Lexar Media, Inc.
                                                      2000 Equity Incentive Plan

          (c)  Notwithstanding the provisions in paragraph 5.6(a) above, if a
               Participant is terminated for Cause, neither the Participant, the
               Participant's estate nor such other person who may then hold the
               Option shall be entitled to exercise any Option with respect to
               any Shares whatsoever, after termination of service, whether or
               not after termination of service the Participant may receive
               payment from the Company or Subsidiary for vacation pay, for
               services rendered prior to termination, for services rendered for
               the day on which termination occurs, for salary in lieu of
               notice, or for any other benefits.  In making such determination,
               the Board shall give the Participant an opportunity to present to
               the Board evidence on his behalf.  For the purpose of this
               paragraph, termination of service shall be deemed to occur on the
               date when the Company dispatches notice or advice to the
               Participant that his service is terminated.

          5.7  Limitations on Exercise.  The Committee may specify a reasonable
               -----------------------
minimum number of Shares that may be purchased on any exercise of an Option,
provided that such minimum number will not prevent Participant from exercising
the Option for the full number of Shares for which it is then exercisable.

          5.8  Limitations on ISO.  The aggregate Fair Market Value (determined
               ------------------
as of the date of grant) of Shares with respect to which ISO are exercisable for
the first time by a Participant during any calendar year (under this Plan or
under any other incentive stock option plan of the Company, Parent or Subsidiary
of the Company) will not exceed $100,000.  If the Fair Market Value of Shares on
the date of grant with respect to which ISO are exercisable for the first time
by a Participant during any calendar year exceeds $100,000, then the Options for
the first $100,000 worth of Shares to become exercisable in such calendar year
will be ISO and the Options for the amount in excess of $100,000 that become
exercisable in that calendar year will be NQSOs.  In the event that the Code or
the regulations promulgated thereunder are amended after the Effective Date of
this Plan to provide for a different limit on the Fair Market Value of Shares
permitted to be subject to ISO, such different limit will be automatically
incorporated herein and will apply to any Options granted after the effective
date of such amendment.

          5.9  Modification, Extension or Renewal.  The Committee may modify,
               ----------------------------------
extend or renew outstanding Options and authorize the grant of new Options in
substitution therefor, provided that any such action may not, without the
written consent of a Participant, impair any of such Participant's rights under
any Option previously granted.  Any outstanding ISO that is modified, extended,
renewed or otherwise altered will be treated in accordance with Section 424(h)
of the Code.  The Committee may reduce the Exercise Price of outstanding Options
without the consent of Participants affected by a written notice to them;
provided, however, that the Exercise Price may not be reduced below the minimum
--------  -------
Exercise Price that would be permitted under Section 5.4 of this Plan for
Options granted on the date the action is taken to reduce the Exercise Price.

          5.10 No Disqualification.  Notwithstanding any other provision in this
               -------------------
Plan, no term of this Plan relating to ISO will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.

     6.   RESTRICTED STOCK.  A Restricted Stock Award is an offer by the Company
          ----------------
to sell to an eligible person Shares that are subject to restrictions.  The
Committee will determine to whom an offer will be made, the number of Shares the
person may purchase, the price to be paid (the "Purchase Price"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:

          6.1  Form of Restricted Stock Award.  All purchases under a Restricted
               ------------------------------
Stock Award made pursuant to this Plan will be evidenced by an Award Agreement
("Restricted Stock Purchase Agreement") that will be in such form (which need
not be the same for each Participant) as the Committee will from time to time
approve, and will comply with and be subject to the terms and conditions of this
Plan.  The offer of Restricted Stock will be accepted by the Participant's
execution and delivery of the Restricted Stock Purchase Agreement and full
payment for the Shares to the Company within thirty (30) days from the date the
Restricted Stock Purchase Agreement is

                                       4
<PAGE>

                                                               Lexar Media, Inc.
                                                      2000 Equity Incentive Plan

delivered to the person. If such person does not execute and deliver the
Restricted Stock Purchase Agreement along with full payment for the Shares to
the Company within thirty (30) days, then the offer will terminate, unless
otherwise determined by the Committee.

          6.2  Purchase Price.  The Purchase Price of Shares sold pursuant to a
               --------------
Restricted Stock Award will be determined by the Committee on the date the
Restricted Stock Award is granted, except in the case of a sale to a Ten Percent
Stockholder, in which case the Purchase Price will be 100% of the Fair Market
Value.  Payment of the Purchase Price may be made in accordance with Section 8
of this Plan.

          6.3  Terms of Restricted Stock Awards.  Restricted Stock Awards shall
               --------------------------------
be subject to such restrictions as the Committee may impose.  These restrictions
may be based upon completion of a specified number of years of service with the
Company or upon completion of the performance goals as set out in advance in the
Participant's individual Restricted Stock Purchase Agreement.  Restricted Stock
Awards may vary from Participant to Participant and between groups of
Participants.  Prior to the grant of a Restricted Stock Award, the Committee
shall:  (a) determine the nature, length and starting date of any Performance
Period for the Restricted Stock Award; (b) select from among the Performance
Factors to be used to measure performance goals, if any; and (c) determine the
number of Shares that may be awarded to the Participant.  Prior to the payment
of any Restricted Stock Award, the Committee shall determine the extent to which
such Restricted Stock Award has been earned.  Performance Periods may overlap
and Participants may participate simultaneously with respect to Restricted Stock
Awards that are subject to different Performance Periods and having different
performance goals and other criteria.

          6.4  Termination During Performance Period.  If a Participant is
               -------------------------------------
Terminated during a Performance Period for any reason, then such Participant
will be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Restricted Stock Award only to the extent earned as of the date of
Termination in accordance with the Restricted Stock Purchase Agreement, unless
the Committee will determine otherwise.

     7.   STOCK BONUSES.
          -------------

          7.1  Awards of Stock Bonuses.  A Stock Bonus is an award of Shares
               -----------------------
(which may consist of Restricted Stock) for services rendered to the Company or
any Parent or Subsidiary of the Company.  A Stock Bonus may be awarded for past
services already rendered to the Company, or any Parent or Subsidiary of the
Company pursuant to an Award Agreement (the "Stock Bonus Agreement") that will
be in such form (which need not be the same for each Participant) as the
Committee will from time to time approve, and will comply with and be subject to
the terms and conditions of this Plan.  A Stock Bonus may be awarded upon
satisfaction of such performance goals as are set out in advance in the
Participant's individual Award Agreement (the "Performance Stock Bonus
Agreement") that will be in such form (which need not be the same for each
Participant) as the Committee will from time to time approve, and will comply
with and be subject to the terms and conditions of this Plan.  Stock Bonuses may
vary from Participant to Participant and between groups of Participants, and may
be based upon the achievement of the Company, Parent or Subsidiary and/or
individual performance factors or upon such other criteria as the Committee may
determine.

          7.2  Terms of Stock Bonuses.  The Committee will determine the number
               ----------------------
of Shares to be awarded to the Participant.  If the Stock Bonus is being earned
upon the satisfaction of performance goals pursuant to a Performance Stock Bonus
Agreement, then the Committee will: (a)  determine the nature, length and
starting date of any Performance Period for each Stock Bonus; (b) select from
among the Performance Factors to be used to measure the performance, if any; and
(c) determine the number of Shares that may be awarded to the Participant.
Prior to the payment of any Stock Bonus, the Committee shall determine the
extent to which such Stock Bonuses have been earned.  Performance Periods may
overlap and Participants may participate simultaneously with respect to Stock
Bonuses that are subject to different Performance Periods and different
performance goals and other criteria.  The number of Shares may be fixed or may
vary in accordance with such performance goals and criteria as may be determined
by the Committee.  The Committee may adjust the performance goals applicable to
the Stock Bonuses to take into account changes in law and accounting or tax
rules and to make such adjustments as the

                                       5
<PAGE>

                                                               Lexar Media, Inc.
                                                      2000 Equity Incentive Plan

Committee deems necessary or appropriate to reflect the impact of extraordinary
or unusual items, events or circumstances to avoid windfalls or hardships.

          7.3  Form of Payment.  The earned portion of a Stock Bonus may be paid
               ---------------
currently or on a deferred basis with such interest or dividend equivalent, if
any, as the Committee may determine.  Payment may be made in the form of cash or
whole Shares or a combination thereof, either in a lump sum payment or in
installments, all as the Committee will determine.

     8.   PAYMENT FOR SHARE PURCHASES.
          ---------------------------

          8.1  Payment.  Payment for Shares purchased pursuant to this Plan may
               -------
be made in cash (by check) or, where expressly approved for the Participant by
the Committee and where permitted by law:

          (a)  by cancellation of indebtedness of the Company to the
               Participant;

          (b)  by surrender of shares that either:  (1) have been owned by
               Participant for more than six (6) months and have been paid for
               within the meaning of SEC Rule 144 (and, if such shares were
               purchased from the Company by use of a promissory note, such note
               has been fully paid with respect to such shares); or (2) were
               obtained by Participant in the public market;

          (c)  by tender of a full recourse promissory note having such terms as
               may be approved by the Committee and bearing interest at a rate
               sufficient to avoid imputation of income under Sections 483 and
               1274 of the Code; provided, however, that Participants who are
                                 --------  -------
               not employees or directors of the Company will not be entitled to
               purchase Shares with a promissory note unless the note is
               adequately secured by collateral other than the Shares;

          (d)  by waiver of compensation due or accrued to the Participant for
               services rendered;

          (e)  with respect only to purchases upon exercise of an Option, and
               provided that a public market for the Company's stock exists:

               (1)  through a "same day sale" commitment from the Participant
                    and a broker-dealer that is a member of the National
                    Association of Securities Dealers (an "NASD Dealer") whereby
                    the Participant irrevocably elects to exercise the Option
                    and to sell a portion of the Shares so purchased to pay for
                    the Exercise Price, and whereby the NASD Dealer irrevocably
                    commits upon receipt of such Shares to forward the Exercise
                    Price directly to the Company; or

               (2)  through a "margin" commitment from the Participant and a
                    NASD Dealer whereby the Participant irrevocably elects to
                    exercise the Option and to pledge the Shares so purchased to
                    the NASD Dealer in a margin account as security for a loan
                    from the NASD Dealer in the amount of the Exercise Price,
                    and whereby the NASD Dealer irrevocably commits upon receipt
                    of such Shares to forward the Exercise Price directly to the
                    Company; or

          (f)  by any combination of the foregoing.

          8.2  Loan Guarantees.  The Committee may help the Participant pay for
               ---------------
Shares purchased under this Plan by authorizing a guarantee by the Company of a
third-party loan to the Participant.

                                       6
<PAGE>

                                                               Lexar Media, Inc.
                                                      2000 Equity Incentive Plan

     9.   AUTOMATIC GRANTS TO OUTSIDE DIRECTORS.
          --------------------------------------

          9.1  Types of Options and Shares.  Options granted under this Plan and
               ----------------------------
subject to this Section 9 shall be NQSOs.

          9.2  Eligibility.  Options subject to this Section 9 shall be granted
               -----------
only to Outside Directors.

          9.3  Initial Grant.  Each Outside Director who first becomes a member
               -------------
of the Board on or after the Effective Date will automatically be granted an
Option for 50,000 Shares (an "Initial Grant") on the date such Outside Director
first becomes a member of the Board.  Each Outside Director who became a member
of the Board prior to the Effective Date will automatically be granted an Option
for 25,000 Shares immediately following the Effective Date.

          9.4  Succeeding Grant.  Immediately following each Annual Meeting of
               ----------------
stockholders, each Outside Director will automatically be granted an Option for
25,000 Shares (a "Succeeding Grant"), provided the Outside Director is a member
of the Board on such date and has served continuously as a member of the Board
for a period of at least one year since the date of such Outside Director's
Initial Grant.  Notwithstanding anything in this Section 9.4 to the contrary,
the Board may make discretionary supplemental grants to an Outside Director who
has served for less than one year from the date of such Outside Director's
Initial Grant, provided that no Outside Director may receive more than 75,000
               --------
Shares in any calendar year pursuant to this Section 9.

          9.5  Vesting.  The date an Outside Director receives an Initial Grant
               -------
or a Succeeding Grant is referred to in this Plan as the "Start Date" for such
Option.

          (a)  Initial Grants.  Each Initial Grant will vest as to twenty-five
               --------------
               percent (25%) of the Shares on the one (1) year anniversary of
               the Start Date for such Initial Grant, and as to 2.08333% of the
               Shares on each subsequent monthly anniversary thereafter, so long
               as the Outside Director continuously remains a director or
               consultant of the Company.

          (b)  Succeeding Grants.  Each Succeeding Grant will vest as to twenty-
               -----------------
               five percent (25%) of the Shares on the one (1) year anniversary
               of the Start Date for such Succeeding Grant, and as to 2.08333%
               of the Shares on each subsequent monthly anniversary thereafter,
               so long as the Outside Director continuously remains a director
               or consultant of the Company.

Notwithstanding any provision to the contrary, in the event of a Corporate
Transaction described in Section 18.1, the vesting of all options granted to
Outside Directors pursuant to this Section 9 will accelerate and such options
will become exercisable in full prior to the consummation of such event at such
times and on such conditions as the Committee determines, and must be exercised,
if at all, within three months of the consummation of said event.  Any options
not exercised within such three-month period shall expire.

          9.6  Exercise Price.  The exercise price of an Option pursuant to an
               --------------
Initial Grant and Succeeding Grant shall be the Fair Market Value of the Shares,
at the time that the Option is granted.

     10.  WITHHOLDING TAXES.
          -----------------

          10.1 Withholding Generally.  Whenever Shares are to be issued in
               ---------------------
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares.  Whenever, under this Plan,
payments in satisfaction of Awards are to be made in cash, such payment will be
net of an amount sufficient to satisfy federal, state, and local withholding tax
requirements.

                                       7
<PAGE>

                                                               Lexar Media, Inc.
                                                      2000 Equity Incentive Plan

          10.2 Stock Withholding.  When, under applicable tax laws, a
               -----------------
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined.  All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee and be in writing in a form acceptable to the
Committee.

     11.  TRANSFERABILITY.
          ---------------

          11.1 Except as otherwise provided in this Section 11, Awards granted
under this Plan, and any interest therein, will not be transferable or
assignable by Participant, and may not be made subject to execution, attachment
or similar process, otherwise than by will or by the laws of descent and
distribution or as determined by the Committee and set forth in the Award
Agreement with respect to Awards that are not ISOs.

          11.2 All Awards other than NQSO's.  All Awards other than NQSO's shall
               -----------------------------
be exercisable: (i) during the Participant's lifetime, only by (A) the
Participant, or (B) the Participant's guardian or legal representative; and (ii)
after Participant's death, by the legal representative of the Participant's
heirs or legatees.

          11.3 NQSOs.  Unless otherwise restricted by the Committee, an NQSO
               -----
shall be exercisable: (i) during the Participant's lifetime only by (A) the
Participant, (B) the Participant's guardian or legal representative, (C) a
Family Member of the Participant who has acquired the NQSO by "permitted
transfer;" and (ii) after Participant's death, by the legal representative of
the Participant's heirs or legatees.  "Permitted transfer" means, as authorized
by this Plan and the Committee in an NQSO, any transfer effected by the
Participant during the Participant's lifetime of an interest in such NQSO but
only such transfers which are by gift or domestic relations order.  A permitted
transfer does not include any transfer for value and neither of the following
are transfers for value:  (a) a transfer of under a domestic relations order in
settlement of marital property rights or (b) a transfer to an entity in which
more than fifty percent of the voting interests are owned by Family Members or
the Participant in exchange for an interest in that entity.

     12.  PRIVILEGES OF STOCK OWNERSHIP; RESTRICTIONS ON SHARES..
          ------------------------------------------------------

          12.1 Voting and Dividends.  No Participant will have any of the rights
               --------------------
of a stockholder with respect to any Shares until the Shares are issued to the
Participant.  After Shares are issued to the Participant, the Participant will
be a stockholder and have all the rights of a stockholder with respect to such
Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
                                                        --------
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock; provided, further, that the Participant will have no right to
                  --------  -------
retain such stock dividends or stock distributions with respect to Shares that
are repurchased at the Participant's Purchase Price or Exercise Price pursuant
to Section 12.

          12.2 Financial Statements.  The Company will provide financial
               --------------------
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Awards outstanding; provided, however, the Company will not be
                                    --------  -------
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.

          12.3 Restrictions on Shares.  At the discretion of the Committee, the
               -----------------------
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right to repurchase a portion of or all Unvested Shares held by a Participant
following such Participant's Termination at any time within ninety (90) days
after the later of Participant's Termination Date and the date Participant
purchases Shares under this Plan, for cash and/or

                                       8
<PAGE>

                                                               Lexar Media, Inc.
                                                      2000 Equity Incentive Plan

cancellation of purchase money indebtedness, at the Participant's Exercise Price
or Purchase Price, as the case may be.

     13.  CERTIFICATES.  All certificates for Shares or other securities
          ------------
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.

     14.  ESCROW; PLEDGE OF SHARES.  To enforce any restrictions on a
          ------------------------
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates.  Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
                                   --------  -------
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral.  In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve.  The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.

     15.  EXCHANGE AND BUYOUT OF AWARDS.  The Committee may, at any time or from
          -----------------------------
time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards.  The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant may agree.

     16.  SECURITIES LAW AND OTHER REGULATORY COMPLIANCE.  An Award will not be
          ----------------------------------------------
effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance.
Notwithstanding any other provision in this Plan, the Company will have no
obligation to issue or deliver certificates for Shares under this Plan prior to:
(a) obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable; and/or (b) completion of any registration
or other qualification of such Shares under any state or federal law or ruling
of any governmental body that the Company determines to be necessary or
advisable.  The Company will be under no obligation to register the Shares with
the SEC or to effect compliance with the registration, qualification or listing
requirements of any state securities laws, stock exchange or automated quotation
system, and the Company will have no liability for any inability or failure to
do so.

     17.  NO OBLIGATION TO EMPLOY.  Nothing in this Plan or any Award granted
          -----------------------
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.

     18.  CORPORATE TRANSACTIONS.
          ----------------------

          18.1 Assumption or Replacement of Awards by Successor.  Except for
               ------------------------------------------------
automatic grants to Outside Directors pursuant to Section 9 hereof, in the event
of (a) a dissolution or liquidation of the Company, (b) a

                                       9
<PAGE>

                                                               Lexar Media, Inc.
                                                      2000 Equity Incentive Plan

merger or consolidation in which the Company is not the surviving corporation
(other than a merger or consolidation with a wholly-owned subsidiary, a
reincorporation of the Company in a different jurisdiction, or other transaction
in which there is no substantial change in the stockholders of the Company or
their relative stock holdings and the Awards granted under this Plan are
assumed, converted or replaced by the successor corporation, which assumption
will be binding on all Participants), (c) a merger in which the Company is the
surviving corporation but after which the stockholders of the Company
immediately prior to such merger (other than any stockholder that merges, or
which owns or controls another corporation that merges, with the Company in such
merger) cease to own their shares or other equity interest in the Company, (d)
the sale of substantially all of the assets of the Company, or (e) the
acquisition, sale, or transfer of more than 50% of the outstanding shares of the
Company by tender offer or similar transaction (each, a "Corporate
Transaction"), (i) the vesting of all outstanding Awards will accelerate as to
an additional 25% of the Shares that are unvested on the date of the Corporate
Transaction and, (ii) thereafter, unless otherwise set forth below, all unvested
shares subject to outstanding Awards will continue to vest in equal monthly
installments over the remaining original vesting term as set forth in the Award
Agreement. Upon a Corporate Transaction, all outstanding Awards shall be assumed
by the successor or acquiring corporation (if any), which assumption will be
binding on all Participants. In the alternative, the successor or acquiring
corporation may substitute equivalent Awards or provide substantially similar
consideration to Participants as was provided to shareholders (after taking into
account the existing provisions of the Awards). The successor corporation may
also issue, in place of outstanding unvested Shares of the Company held by the
Participants, substantially similar shares or other property subject to
repurchase restrictions no less favorable to the Participant. In the event such
successor corporation (if any) refuses to assume or substitute Awards, as
provided above, pursuant to a Corporate Transaction described in this Subsection
18.1, such Awards will expire on such Corporate Transaction at such time and on
such conditions as the Committee will determine. Notwithstanding anything in
this Plan to the contrary, the Committee may, in its sole discretion, provide
that the vesting of any or all Awards granted pursuant to this Plan will
accelerate upon a Corporate Transaction described in this Section 18. If the
Committee exercises such discretion with respect to Options, such Options will
become exercisable in full prior to the consummation of such event at such time
and on such conditions as the Committee determines, and if such Options are not
exercised prior to the consummation of the Corporate Transaction, they shall
terminate at such time as determined by the Committee.

          18.2 Other Treatment of Awards.  Subject to any greater rights granted
               -------------------------
to Participants under the foregoing provisions of this Section 18, in the event
of the occurrence of any Corporate Transaction described in Section 18.1, any
outstanding Awards will be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, or sale of assets.

          18.3 Assumption of Awards by the Company.  The Company, from time to
               -----------------------------------
time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either; (a) granting an Award under this Plan in substitution of
such other company's award; or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan.  Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant.  In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of Shares issuable
 ------
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code).  In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.

     19.  ADOPTION AND STOCKHOLDER APPROVAL.  This Plan will become effective on
          ---------------------------------
the date on which the registration statement filed by the Company with the SEC
under the Securities Act registering the initial public offering of the
Company's Common Stock is declared effective by the SEC (the "Effective Date").
This Plan shall be approved by the stockholders of the Company (excluding Shares
issued pursuant to this Plan), consistent with applicable laws, within twelve
(12) months before or after the date this Plan is adopted by the Board.  Upon
the Effective Date, the Committee may grant Awards pursuant to this Plan;
provided, however, that: (a) no Option may be exercised prior to initial
--------  -------
stockholder approval of this Plan; (b) no Option granted pursuant to an

                                       10
<PAGE>

                                                               Lexar Media, Inc.
                                                      2000 Equity Incentive Plan

increase in the number of Shares subject to this Plan approved by the Board will
be exercised prior to the time such increase has been approved by the
stockholders of the Company; (c) in the event that initial stockholder approval
is not obtained within the time period provided herein, all Awards granted
hereunder shall be cancelled, any Shares issued pursuant to any Awards shall be
cancelled and any purchase of Shares issued hereunder shall be rescinded; and
(d) in the event that stockholder approval of such increase is not obtained
within the time period provided herein, all Awards granted pursuant to such
increase will be cancelled, any Shares issued pursuant to any Award granted
pursuant to such increase will be cancelled, and any purchase of Shares pursuant
to such increase will be rescinded.

     20.  TERM OF PLAN/GOVERNING LAW.  Unless earlier terminated as provided
          --------------------------
herein, this Plan will terminate ten (10) years from the date this Plan is
adopted by the Board or, if earlier, the date of stockholder approval.  This
Plan and all agreements thereunder shall be governed by and construed in
accordance with the laws of the State of California.

     21.  AMENDMENT OR TERMINATION OF PLAN.  The Board may at any time terminate
          --------------------------------
or amend this Plan in any respect, including without limitation amendment of any
form of Award Agreement or instrument to be executed pursuant to this Plan;
provided, however, that the Board will not, without the approval of the
--------  -------
stockholders of the Company, amend this Plan in any manner that requires such
stockholder approval.

     22.  NONEXCLUSIVITY OF THE PLAN.  Neither the adoption of this Plan by the
          --------------------------
Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under this Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.

     23.  DEFINITIONS.  As used in this Plan, the following terms will have the
          -----------
following meanings:

          "Award" means any award under this Plan, including any Option,
Restricted Stock or Stock Bonus.

          "Award Agreement" means, with respect to each Award, the signed
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award.

          "Board" means the Board of Directors of the Company.

          "Cause" means the commission of an act of theft, embezzlement, fraud,
dishonesty or a breach of fiduciary duty to the Company or a Parent or
Subsidiary of the Company.

          "Code" means the Internal Revenue Code of 1986, as amended.

          "Committee" means the Compensation Committee of the Board.

          "Company" means Lexar Media, Inc. or any successor corporation.

          "Disability" means a disability, whether temporary or permanent,
partial or total, as determined by the Committee.

          "Exchange Act" means the Securities Exchange Act of 1934, as amended.

          "Exercise Price" means the price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.

                                       11
<PAGE>

                                                               Lexar Media, Inc.
                                                      2000 Equity Incentive Plan

          "Fair Market Value" means, as of any date, the value of a share of the
Company's Common Stock determined as follows:

          (a)  if such Common Stock is then quoted on the Nasdaq National
               Market, its closing price on the Nasdaq National Market on the
               date of determination as reported in The Wall Street Journal;
                                                    -----------------------

          (b)  if such Common Stock is publicly traded and is then listed on a
               national securities exchange, its closing price on the date of
               determination on the principal national securities exchange on
               which the Common Stock is listed or admitted to trading as
               reported in The Wall Street Journal;
                           -----------------------

          (c)  if such Common Stock is publicly traded but is not quoted on the
               Nasdaq National Market nor listed or admitted to trading on a
               national securities exchange, the average of the closing bid and
               asked prices on the date of determination as reported in The Wall
                                                                        --------
               Street Journal;
               --------------

          (d)  in the case of an Award made on the Effective Date, the price per
               share at which shares of the Company's Common Stock are initially
               offered for sale to the public by the Company's underwriters in
               the initial public offering of the Company's Common Stock
               pursuant to a registration statement filed with the SEC under the
               Securities Act;  or

          (e)  if none of the foregoing is applicable, by the Committee in good
               faith.

          "Family Member" includes any of the following:

          (a)  child, stepchild, grandchild, parent, stepparent, grandparent,
               spouse, former spouse, sibling, niece, nephew, mother-in-law,
               father-in-law, son-in-law, daughter-in-law, brother-in-law, or
               sister-in-law of the Participant, including any such person with
               such relationship to the Participant by adoption;

          (b)  any person (other than a tenant or employee) sharing the
               Participant's household;

          (c)  a trust in which the persons in (a) and (b) have more than fifty
               percent of the beneficial interest;

          (d)  a foundation in which the persons in (a) and (b) or the
               Participant control the management of assets; or

          (e)  any other entity in which the persons in (a) and (b) or the
               Participant own more than fifty percent of the voting interest.

          "Insider" means an officer or director of the Company or any other
person whose transactions in the Company's Common Stock are subject to Section
16 of the Exchange Act.

          "Option" means an award of an option to purchase Shares pursuant to
Section 5.

          "Outside Director" means a member of the Board who is not an employee
of the Company or any Parent, Subsidiary or Affiliate of the Company.

          "Parent" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company if each of such corporations other
than the Company owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.

                                       12
<PAGE>

                                                               Lexar Media, Inc.
                                                      2000 Equity Incentive Plan

          "Participant" means a person who receives an Award under this Plan.

          "Performance Factors" means the factors selected by the Committee from
among the following measures to determine whether the performance goals
established by the Committee and applicable to Awards have been satisfied:

          (a) Net revenue and/or net revenue growth;

          (b) Earnings before income taxes and amortization and/or earnings
              before income taxes and amortization growth;

          (c) Operating income and/or operating income growth;

          (d) Net income and/or net income growth;

          (e) Earnings per share and/or earnings per share growth;

          (f) Total stockholder return and/or total stockholder return growth;

          (g) Return on equity;

          (h) Operating cash flow return on income;

          (i) Adjusted operating cash flow return on income;

          (j) Economic value added; and

          (k) Individual confidential business objectives.

          "Performance Period" means the period of service determined by the
Committee, not to exceed five years, during which years of service or
performance is to be measured for Restricted Stock Awards or Stock Bonuses.

          "Plan" means this Lexar Media, Inc. 2000 Equity Incentive Plan, as
amended from time to time.

          "Restricted Stock Award" means an award of Shares pursuant to Section
6.

          "SEC" means the Securities and Exchange Commission.

          "Securities Act" means the Securities Act of 1933, as amended.

          "Shares" means shares of the Company's Common Stock reserved for
issuance under this Plan, as adjusted pursuant to Sections 2 and 18, and any
successor security.

          "Stock Bonus" means an award of Shares, or cash in lieu of Shares,
pursuant to Section 7.

          "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.

          "Termination" or "Terminated" means, for purposes of this Plan with
respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director, consultant,

                                       13
<PAGE>

                                                               Lexar Media, Inc.
                                                      2000 Equity Incentive Plan

independent contractor, or advisor to the Company or a Parent or Subsidiary of
the Company. An employee will not be deemed to have ceased to provide services
in the case of (i) sick leave, (ii) military leave, or (iii) any other leave of
absence approved by the Committee, provided, that such leave is for a period of
not more than 90 days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute or unless provided otherwise pursuant to
formal policy adopted from time to time by the Company and issued and
promulgated to employees in writing. In the case of any employee on an approved
leave of absence, the Committee may make such provisions respecting suspension
of vesting of the Award while on leave from the employ of the Company or a
Subsidiary as it may deem appropriate, except that in no event may an Option be
exercised after the expiration of the term set forth in the Option agreement.
The Committee will have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant
ceased to provide services (the "Termination Date").

          "Unvested Shares" means "Unvested Shares" as defined in the Award
Agreement.

          "Vested Shares" means "Vested Shares" as defined in the Award
Agreement.

                                       14

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