Document:

Unassociated Document

    STERLING
BANKS, INC.

    2008
DIRECTOR STOCK OPTION PLAN

    (AS
AMENDED)

     

    1. Purpose. The purpose of this
2008 Director Stock Option Plan (the “Plan”) of Sterling Banks, Inc., a New
Jersey corporation (the “Company”), is to encourage stock ownership by the
directors of the Company to provide an incentive for the directors to contribute
to the growth and prosperity of the Company, and to assist the Company in
attracting and retaining directors through the grant of options to purchase
shares of the Company’s common stock to all directors of the Company who are not
employees of the Company.  Except where the context otherwise
requires, the term “Company” shall include any of the Company’s present or
future parent or subsidiary corporations as defined in Sections 424(e) or (f) of
the Internal Revenue Code of 1986, as amended, and any regulations promulgated
thereunder (the “Code”).

     

    2. Definitions.

     

    (a) “Affiliate” means (i) any
entity in which the Company, directly or indirectly, owns 50% or more of the
combined voting power, as determined by the Committee, (ii) any “parent
corporation” of the Company (as defined in Section 424(e) of the Code), (iii)
any “subsidiary corporation” of any such parent corporation (as defined in
section 424(f) of the Code) of the Company and (iv) any trades or businesses,
whether or not incorporated which are members of a controlled group or are under
common control (as defined in Sections 414(b) or (c) of the Code) with the
Company.

     

    (b) “Option Agreement” means a
written or electronic agreement setting forth the terms and provisions
applicable to an Option granted under the Plan. Each Option Agreement is subject
to the terms and conditions of the Plan.

     

    (c) “Board” means the Board of
Directors of the Company.

     

    (d) “Change of Control” shall be
deemed to have occurred upon any of the following events:

     

    (i) any
“person” (as defined in Section 3(a)(9) of the Exchange Act, and as modified in
Section 13(d) and 14(d) of the Exchange Act) other than (i) the Company or any
of its subsidiaries, (ii) any employee benefit plan of the Company or any of its
subsidiaries, (iii) any Affiliate, (iv) a company owned, directly or indirectly,
by shareholders of the Company in substantially the same proportions as their
ownership of the Company or (v) an underwriter temporarily holding securities
pursuant to an offering of such securities, becomes the “beneficial owner” (as
defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of
securities of the Company representing more than 50% of the shares of voting
stock of the Company then outstanding;

     

    (ii) the
consummation of any merger, organization, business combination or consolidation
of the Company or one of its subsidiaries with or into any other entity, other
than a merger, reorganization, business combination or consolidation which would
result in the holders of the voting securities of the Company outstanding
immediately prior thereto holding securities which represent immediately after
such merger, reorganization, business combination or consolidation more than 50%
of the combined voting power of the voting securities of the Company or the
surviving company or the parent of such surviving company;

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (iii) the
consummation of a sale or disposition by the Company of all or substantially all
of the Company’s assets, other than a sale or disposition if the holders of the
voting securities of the Company outstanding immediately prior thereto hold
securities immediately thereafter which represent more than 50% of the combined
voting power of the voting securities of the acquirer, or parent of the
acquirer, of such assets;

     

    (iv) the
shareholders of the Company approve a plan of complete liquidation or
dissolution of the Company; or

     

    (v) individuals
who, as of the Effective Date, constitute the Board (the “Incumbent Board”)
cease for any reason to constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the Effective Date whose election
by the Board, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an election contest with respect to the election or removal of
directors or other solicitation of proxies or consents by or on behalf of a
person other than the Board.

     

    (e) “Code” means the Internal
Revenue Code of 1986, as amended, and any successor Code, and related rules,
regulations and interpretations.

     

    (f) “Committee” means the
Compensation Committee of the Board, or such other committee designated by the
Board, which is authorized to administer the Plan under Section 3 hereof, and
shall be composed of only Non-Employee Directors. The members of the Committee
shall also meet the “independence” requirements of the Nasdaq Stock Market, Inc.
or such other “independence” definition applicable to the Company’s reports to
the Securities and Exchange Commission. The number of persons who shall serve on
the Committee shall be specified from time to time by the Board; however, in no
event shall there be fewer than two members of the Committee. The Committee will
be composed in a manner such that the Plan will qualify under Rule 16b-3 with
regard to Options to persons who are subject to Section 16 of the Exchange Act
and will be comprised only of outside directors as defined in Treasury
Regulation Section 1.162-27(e)(3). If at any time the Committee has fewer than
two members or the Committee otherwise ceases to exist, then the Plan shall be
administered by the Board, and all references herein to the Committee shall
refer to the Board.

     

    (g) “Common Stock” means Common
Stock of the Company, $2.00 par value per share,

     

    (h) “Company” means Sterling
Banks, Inc.

     

    (i) “Director” means a member of
the Board.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (j) “Disability” means an
inability to perform the Non-Employee Director material services for the Company
for a period of 90 consecutive days or a total of 180 days, during any 365-day
period, in either case as a result of incapacity due to mental or physical
illness, which is determined to be total and permanent.  A
determination of Disability shall be made by a physician satisfactory to both
the Participant (or his guardian) and the Company, provided that if the
Non-Employee Director (or his guardian) and the Company do not agree on a
physician, the Non-Employee Director and the Company shall each select a
physician and these two together shall select a third physician, whose
determination as to Disability shall be final, binding and conclusive with
respect to all parties. Notwithstanding the above, eligibility for disability
benefits under any policy for long-term disability benefits provided to the
Participant by the Company shall conclusively establish the Participant’s
disability.

     

    (k) “Effective Date” means the
date that the Plan is approved by the shareholders of the Company.

     

    (l) “Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder.

     

    (m) “Fair Market Value” means, on
any date, the average of the high and low sales prices of the Common Stock on
the principal national securities exchange, which includes the Nasdaq Stock
Market, Inc., or other market on which such Common Stock is listed or admitted
to trading or if not traded on that date, then on the date last traded; or if
such Common Stock is not so listed or admitted to trading, the arithmetic mean
of the per share closing bid price and per share closing asked price on such
date as quoted on any other system of Nasdaq or such other market in which such
prices are regularly quoted; or if there have been no published bid or asked
quotations, the Committee shall, in good faith and in accordance with Section
422 of the Code, establish the method for determining the Fair Market Value of
the Common Stock.

     

    (n) “Non-Employee Director” means
a member of the Board who is not, and who has not been during the last three
fiscal years been, an employee or executive officer of the Company or any
Subsidiary.

     

    (o) “Option” or “Stock Option” means any
option to purchase shares of Stock granted pursuant to Section 7.

     

    (p) “Participant” means any
individual to whom an Option is granted under the Plan.

     

    (q) “Plan” means this Plan, which
shall be known as the “Sterling Banks, Inc. 2008 Director Stock Option
Plan.”

     

    (r) “Rule 16b-3” means Rule 16b-3
promulgated under the Exchange Act, as amended, or any successor
rule.

     

    (s)  “Stock” means the
Common Stock, $2.00 par value per share, of the Company, subject to adjustments
pursuant to Section 5.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    (t) “Subsidiary” means any
corporation or other entity (other than the Company) in (i) which the Company
has at least a 50 percent interest, either directly or indirectly or (ii) of
which it has a right to elect or appoint 50% or more of the board of directors
or other governing body.

     

    3. Administration.

     

    (a) The Plan
shall be administered by the Committee. The Committee shall have the authority
to:

     

    (i) construe
and interpret the terms and conditions of the Plan and any Option issued under
the Plan (and any Option Agreement relating thereto) in its sole discretion and
to otherwise supervise the administration of the Plan;

     

    (ii) promulgate,
amend and rescind rules relating to the implementation of the Plan;

     

    (iii) make all
determinations necessary or advisable for the administration of the Plan,
including the selection of Non-Employee Directors who shall be granted Options,
the number of shares of Common Stock to be subject to each Option, the Option
price or the vesting or duration of Options;

     

    (iv) accelerate
at any time the exercisability or vesting of all or any portion of any
Option;

     

    (v) determine
and modify from time to time the terms and conditions, including restrictions,
not inconsistent with the terms of the Plan, of any Option, which terms and
conditions may differ among individual Options and Participants, and to approve
the form of written instruments evidencing the Options;

     

    (vi) subject
to the provisions of Section 8, extend at any time the period in which Stock
Options may be exercised;

     

    (vii) determine
whether Options will be granted alone or in combination or in tandem with other
Options; and

     

    (viii) determine
whether cash will be paid or Options will be granted in replacement of, or as
alternatives to, other grants under the Plan or any other incentive or
compensation plan of the Company, a Subsidiary or an acquired business unit;
and

     

    (ix) approve
in advance each particular Option to be granted hereunder in a manner which will
cause the Option to be exempt from Section 16(b) of the Exchange Act by virtue
of Rule 16b-3.

     

    (b) Subject
to the requirements of applicable law, the Committee may correct any defect,
supply any omission, or reconcile any inconsistency in the Plan, any Option, or
any Option Agreement; take any and all other actions it deems necessary or
advisable for the proper administration of the Plan; designate persons other
than members of the Committee to carry out its responsibilities; and prescribe
such conditions and limitations as it may deem appropriate; except that the Committee may
not delegate its authority with regard to the selection for participation of, or
the granting of Options to, persons subject to the reporting or other provisions
of Section 16 of the Exchange Act. Any determination, decision, or action of the
Committee in connection with the construction, interpretation, administration,
or application of the Plan shall be final, conclusive and binding upon all
persons validly claiming under or through persons participating in the
Plan.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (c) The
Committee may at any time, and from time to time amend or cancel any outstanding
Option, but only with the consent of the person to whom the Option was
granted.

     

    4. Eligibility.  Participants
under the Plan will be Non-Employee Directors of the Company and its
Subsidiaries as are selected from time to time by the Committee in its sole
discretion.  Any Non-Employee Director is eligible to become a
Participant in the Plan; provided that no Director while a member of the
Committee shall receive any Options under any stock plan of the Company unless
Options are granted equally to all Non-Employee Directors
hereunder.

     

    5. Shares
Available.  Subject to Section 5(a) and 5(b) of the Plan, the
maximum aggregate number of shares of Common Stock available for Option grants
shall be 100,000. Shares of Common Stock subject to an unexercised and expired
or terminated Option shall be available for an Option subsequently granted in
accordance with the Plan.

     

    (a) Changes in Stock. Subject to
Section 5(b) hereof, if, as a result of any reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other
similar change in the Company’s capital stock, the outstanding shares of Stock
are increased or decreased or are exchanged for a different number or kind of
shares or other securities of the Company, or additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Stock or other securities, or, if, as
a result of any merger or consolidation, sale of all or substantially all of the
assets of the Company, the outstanding shares of Stock are converted into or
exchanged for securities of the Company or any successor entity (or a parent or
subsidiary thereof), the Committee shall make an appropriate or proportionate
adjustment in (i) the number of Stock Options that can be granted to any one
individual Participant, (ii) the number and kind of shares or other securities
subject to any then outstanding Options under the Plan, and (iii) the price for
each share subject to any then outstanding Stock Options under the Plan, without
changing the aggregate exercise price (i.e., the exercise price
multiplied by the number of Stock Options) as to which such Stock Options
remain exercisable. The Committee shall also make equitable or proportionate
adjustments in the number of shares subject to outstanding Options and the
exercise price and the terms of outstanding Options to take into consideration
cash dividends paid other than in the ordinary course or any other extraordinary
corporate event. The adjustment by the Committee shall be final, binding and
conclusive. No fractional shares of Stock shall be issued under the Plan
resulting from any such adjustment, but the Committee in its discretion may make
a cash payment in lieu of fractional shares.

     

    (b) Change in
Control.  Unless otherwise provided in the Option or a written
agreement with a Non-Employee Director, in the event of a Change in
Control:

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (i) the Board
or the Committee may accelerate vesting and the time at which all Options then
outstanding may be exercised so that those types of Options may be exercised in
full for a limited period of time on or before a specified date fixed by the
Board or the Committee, after which specified date all unexercised Options and
all rights of Participants thereunder shall terminate, or the Board or Committee
may accelerate vesting and the time at which Options may be exercised so that
those types of Options may be exercised in full for their then remaining
term.

     

    Notwithstanding
the above provisions of this Section 5(b), the Board or the Committee shall not
be required to take any action described in the preceding provisions of this
Section 5(b), and any decision made by the Board or the Committee, in its sole
discretion, not to take some or all of the actions described in the preceding
provisions of this Section 5(b) shall be final, binding and conclusive with
respect to the Company and all other interested persons.

     

    (ii) Right of Cash-Out. If
approved by the Board prior to or within thirty (30) days after such time as a
Change in Control shall be deemed to have occurred, the Board shall have the
right for a forty-five (45) day period immediately following the date that the
Change in Control is deemed to have occurred to require all, but not less than
all, Participants to transfer and deliver to the Company all Options previously
granted to the Participants in exchange for an amount equal to the “cash value”
(defined below) of the Options.  Such right shall be exercised by
written notice to all Participants. For purposes of this Section 5(b)(ii), the
cash value of an Option shall equal the sum of (i) the cash value of all
benefits to which the Participant would be entitled upon settlement or exercise
of any Option which is not an Option and (ii) in the case of any Option that is
an Option, the excess of the “market value” (defined below) per share over the
option price, multiplied by the number of shares subject to such Option. For
purposes of the preceding sentence, “market value” per share shall mean the
higher of (x) the average of the Fair Market Value per share of Common Stock on
each of the five trading days immediately following the date a Change in Control
is deemed to have occurred or (y) the highest price, if any, offered in
connection with the Change in Control. The amount payable to each Participant by
the Company pursuant to this Section 5(b)(ii) shall be in cash or by certified
check and shall be reduced by any taxes required to be withheld.

     

    (c) Substitute Options. In
connection with a merger or consolidation of an entity with the Company or the
acquisition by the Company of property or stock of an entity, the Board or the
Committee may grant Options in substitution for any options or other stock or
stock-based awards granted by such entity or an Affiliate
thereof.  Substitute Options may be granted on such terms as the Board
or the Committee deems appropriate in the circumstances, notwithstanding any
limitations on Options contained in the Plan.  Substitute Options
shall not count against the overall share limit set forth in Section 5, except
as may be required by reason of Section 422 and related provisions of the
Code.

     

    6. Term.  The Plan
will become effective upon approval of the Plan by the Company’s shareholders at
the next annual meeting of shareholders and shall continue in effect until the
10th
anniversary thereof.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    7. Grant;
Exercise Price.

     

    (a) On
September 2 following
each annual meeting of shareholders of the Company after the effective date of
the Plan, each eligible Non-Employee Director of the Company shall receive an
Option to purchase shares of Common Stock of the Company in an amount to be
determined by the Committee.

     

    (b) The
exercise price to be paid for each share of Common Stock deliverable upon
exercise of each Option granted under the Plan shall not be less than one
hundred percent (100%) of the Fair Market Value per share on the date of grant
of such Option.

     

    8. Terms and Conditions of
Options.  Options shall be in such form as the Committee may
from time to time approve, and may contain such additional terms and conditions,
not inconsistent with the Plan as the Committee shall deem
desirable.  The term of each Option shall be fixed by the Committee.
However, no Option shall be exercisable more than ten years after the Stock
Option is granted, and no Option shall be exercisable for less than 100
shares.  Options may be exercised by a Participant in whole or in
part, at any time.

     

    9. Manner of Exercise. In order
to exercise an Option, the person or persons entitled to exercise such Option
shall deliver to the Company payment in full for (i) the shares being purchased
and (ii) unless other arrangements have been made with the Committee, any
required withholding taxes. The payment of the exercise price for each Option
shall either be (x) in cash or by certified check payable and acceptable to the
Company, or (y) with the consent of the Committee, which consent may be granted
or withheld in the Committee’s sole discretion, and upon compliance with such
instructions as the Committee, by delivery of Common Stock having a fair market
value equal to the exercise price, or (z) by any other means set forth in the
Participant’s Option Agreement that is consistent with applicable laws,
regulations or rules.

     

    10. Proceeds. The proceeds
received from the sale of shares of Common Stock pursuant to the exercise of
Options exercised under the Plan will be used for general corporate
purposes.

     

    11. Options not Transferable.
Except as provided below, no Option granted hereunder shall be
transferable other than by will or by the laws of descent and
distribution.  Any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of, or to subject to execution, attachment or similar process,
any Option granted hereunder, or any right thereunder, contrary to the
provisions hereof, shall be void and ineffective, shall give no right to the
purported transferee and shall, at the sole discretion of the Committee, result
in forfeiture of the Option with respect to the shares involved in such
attempt.

     

    With
respect to a specific Option, in accordance with rules and procedures
established by the Committee from time to time, the Participant (or his
guardian) may transfer, for estate planning purposes, all or part of such Option
to one or more immediate family members or related family trusts or partnerships
or similar entities as determined by the Committee. Any Option that is
transferred in accordance with the provisions of this Section 11 may only be
exercised by the person or persons who acquire a proprietary interest in the
Options pursuant to the transfer.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    12. Adjustment of Options. In the
event that at any time after the Effective Date the outstanding shares of Common
Stock are changed into or exchanged for a different number or kind of shares or
other securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, stock split, stock dividend, combination of
shares, Change of Control, or the like, the Board or the Committee shall make
appropriate and equitable adjustments to all Options then outstanding as
provided in Sections 5(a) and 5(b).

     

    13. Option
Repricing.  Only with concurrent shareholder approval, the
Committee, in its absolute discretion, may grant to holders of outstanding
Options, in exchange for the surrender and cancellation of such Options, new
Options having exercise prices lower (or higher with any required consent) than
the exercise price provided in the Options so surrendered and canceled and
containing such other terms and conditions as the Committee may deem
appropriate.

     

    14. Exercise of Stock Options upon
Termination of Services.  Subject to Section 19, stock options
granted to Participants may permit the exercise of options upon the
Participant’s cessation of a service relationship within the following periods,
or such shorter periods as determined by the Committee at the time of
grant:

     

    (a) If on
account of death, Disability or retirement (as defined from time to time by
Company policy), at any time until the expiration date of the Option to exercise
the Option with respect to all or any part of the number of shares which were
purchasable by such Participant at the date of such termination.

     

    (b) If for
any other reason except death, Disability or retirement (as defined from time to
time by Company policy, stock options may be exercised within six (6) months of
such termination.  After such expiration of such six-month period, the
Option shall terminate.

     

    15. Designation of Beneficiary.
Each Participant to whom an Option has been made under the Plan may
designate a beneficiary or beneficiaries to exercise any Option or receive any
payment under any Option payable on or after the Participant’s death. Any such
designation shall be on a form provided for that purpose by the Committee and
shall not be effective until received by the Committee. If no beneficiary has
been designated by a deceased Participant, or if the designated beneficiaries
have predeceased the Participant, the beneficiary shall be the Participant
estate.

     

    16. Tax
Withholding.  The exercise of each Option shall be subject to
the condition that if at any time the Company shall determine in its discretion
that the satisfaction of withholding tax or other withholding liabilities is
necessary or desirable as a condition of, or in connection with, the exercise or
the delivery or purchase of shares pursuant to the Option, then in any such
events, the exercise shall not be effective unless such withholding shall have
been paid by the Participant.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    17. Amendments to the Plan. The
Board may amend, suspend or terminate the Plan or any portion thereof at any
time provided that (i) to the extent required by Section 162(m) of the Code, no
Option granted to a Participant that is intended to comply with Section 162(m)
after the date of such amendment shall become exercisable, realizable or vested,
as applicable to such Option, unless and until such amendment shall have been
approved by the Company’s shareholders if required by Section 162(m) (including
the vote required under Section 162(m)); and (ii) if, and for so long as, the
Company’s securities are traded on Nasdaq, no amendment that would require
shareholder approval under the rules of Nasdaq may be made effective unless and
until such amendment shall have been approved by the Company’s shareholders.
Unless otherwise specified in the amendment, any amendment to the Plan adopted
in accordance with this Section 17 shall apply to, and be binding on the holders
of, all Options outstanding under the Plan at the time the amendment is adopted,
provided the Board determines that such amendment does not materially and
adversely affect the rights of Participants under the Plan. No Option shall be
made that is conditioned upon shareholder approval of any amendment to the
Plan.

     

    18. General
Provisions.

     

    (a) Shares of
Stock shall not be issued pursuant to the exercise of any Option granted
hereunder unless the exercise of such Option and the issuance and delivery of
such shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act, the Exchange Act and the
requirements of any stock exchange upon which the Stock may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.

     

    (b) The
Committee may require each person acquiring shares of Stock pursuant to an
Option to represent to and agree with the Company in writing that such person is
acquiring the Stock without a view to distribution thereof. The certificates for
such Stock may include any legend that the Committee deems appropriate to
reflect any restrictions on transfer.

     

    (c) All
certificates for shares of Stock delivered under the Plan shall be subject to
such stock-transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations, and other requirements of the Securities
and Exchange Commission, any stock exchange upon which the Stock is then listed,
and any applicable Federal or state securities law, and the Committee may cause
a legend or legends to be placed on any such certificates to make appropriate
reference to such restrictions.

     

    (d) No
provision in the Plan or any Option or Option Agreement shall be construed to
confer upon any individual the right to remain in the service of the Company or
any Subsidiary or to interfere in any way with any contractual or other right or
authority of the Company either to increase or decrease the compensation or
other payment to any individual at any time, or to terminate any relationship
between any individual and the Company. In addition, notwithstanding anything
contained in the Plan to the contrary, unless otherwise stated in the applicable
Option Agreement, no Option granted under the Plan shall be affected by any
change of duties or positions of the Participant, so long as such Participant
continues to be a Director of the Company or Subsidiary. The obligation of the
Company to pay any benefits pursuant to this Plan shall be interpreted as a
contractual obligation to pay only those amounts described herein, in the manner
and under the conditions prescribed herein. The Plan shall in no way be
interpreted to require the Company to transfer any amounts to a third party
trustee or otherwise hold any amount in trust or escrow for payment to any
Participant or beneficiary under the terms of the Plan.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    (e) The
adoption of the Plan shall not be deemed to give any Non-Employee Director the
right to be selected as a Participant or to be granted an Option. There is no
obligation for uniformity of treatment of Participants, or holders or
beneficiaries of Options, and the terms and conditions of Options need not be
the same with respect to each recipient.

     

    (f) No
Participant shall have any rights as a shareholder of the Corporation until he
or she acquires an unconditional right under an Option to have shares of Stock
issued to him or her.

     

    (g) Option
exercises and sales of Stock underlying options under the Plan, shall be subject
to the Company’s insider trading policies and procedures as in effect from time
to time.

     

    (h) In the
event of any inconsistency or conflict between the terms of the Plan and an
Option, the terms of the Plan shall govern.

     

    (i) If any
provision of the Plan or any Option is or becomes or is deemed to be invalid,
illegal or unenforceable in any jurisdiction or as to any Participant or Option,
or would disqualify the Plan or any Option under any law deemed applicable by
the Board or the Committee, such provision shall be construed or deemed amended
as necessary to conform to the applicable laws, or if it cannot be
construed or deemed amended without, in the determination of the Board or the
Committee, materially altering the intent of the Plan or the Option, such
provision shall be stricken as to such jurisdiction, Participant or Option, and
the remainder of the Plan and any such Option shall remain in full force and
effect.

     

    (j) Neither
the Board, nor the Company nor the Committee makes any commitment or guarantee
that any federal, state or local tax treatment will apply or be available to any
person participating or eligible to participate hereunder.

     

    19. Exemptions from Section 16(b)
Liability. It is the intent of the Company that the grant of any Options
to or other transaction by a Participant who is subject to Section 16 of the
Exchange Act shall be exempt from Section 16(b) of the Exchange Act pursuant to
an applicable exemption (except for transactions acknowledged by the Participant
in writing to be non-exempt). Accordingly, if any provision of this Plan or any
Option Agreement does not comply with the requirements of Rule 16b-3 as then
applicable to any such transaction, such provision shall be construed or deemed
amended to the extent necessary to conform to the applicable requirements of
Rule 16b-3 so that such Participant shall avoid liability under Section 16(b) of
the Exchange Act.

     

    20. Indemnification. Neither the
Board nor the Committee, nor any member of either or any delegate thereof, shall
be liable for any act, omission, interpretation, construction or determination
made in good faith in connection with the Plan, and the members of the Board and
the Committee (and any delegate thereof) shall be entitled in all cases to
indemnification and reimbursement by the Company in respect of any claim, loss,
damage or expense (including, without limitation, reasonable attorneys’ fees)
arising or resulting therefrom to the fullest extent permitted by law and/or
under the Company’s articles or bylaws or any directors’ and officers’ liability
insurance coverage which may be in effect from time to time and/or any
indemnification agreement between such individual and the Company.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    21. Governing Law.  The
Plan and all determinations made and actions taken thereunder shall be governed
by and construed in accordance with the laws of the State of New Jersey, without
giving effect to the conflict of laws principles thereof.exhibit_10-1.htm

  
    

      Exhibit
10.1

       

       

      
 

      SANDISK
CORPORATION

      CHANGE
OF CONTROL BENEFITS AGREEMENT

      

      This Change of Control Benefits
Agreement ("Agreement") is made and entered into effective as of_____________,
2008 (the "Effective Date") by and between SanDisk Corporation, a Delaware
corporation (the "Company"), and ______________ (the
"Executive").  This Agreement amends and restates in its entirety that
certain Change of Control Benefits Agreement between the Company and the
Executive dated ____________, 200__ (the “Prior Change of Control
Agreement”).

      

      W
I T N E S S E T H:

      

      WHEREAS, the Executive is employed by
the Company in a key position and has made and is expected to continue to make
major contributions to the profitability, growth and financial strength of the
Company.

      

      WHEREAS, the Company considers the
continued availability of the Executive's services, managerial skills and
business experience to be in the best interest of the Company and its
stockholders, and desires to assure the continued services of the Executive on
behalf of the Company without (a) the distraction of the Executive occasioned by
the possibility of a change of control of the Company and (b) the possibility
that the Executive would seek other employment following the announcement of a
change of control of the Company and if such announced transaction were not
consummated, the Company would be seriously harmed.

      

      NOW, THEREFORE, in consideration of
these premises, the parties agree that the following shall constitute the
agreement between the Company and the Executive:

      

      1.              DEFINITIONS.
Whenever the following terms are used in this Agreement, they shall have the
meaning specified below unless the context clearly indicates to the
contrary:

      

      1.01 "Administrator" shall mean the
Board or its delegate.

      

      1.02 "Board" shall mean the Board of
Directors of the Company.

      

      1.03 "Cause" shall mean (i) fraud or
other willful misconduct with respect to the Company's business, (ii) gross
negligence in the performance of duties, or (iii) conviction or plea of nolo
contendere to a felony.

      

      
        
           

        

        
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      1.04 "Change of Control" means the
occurrence of any of the following events:

      

      (a)   Any "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended) becomes the "beneficial owner" (as defined in Rule 13d-3 under
said Act), directly or indirectly, of securities of the Company representing
fifty percent (50%) or more of the then outstanding shares of common stock of
the Company or the total voting power represented by the Company's then
outstanding voting securities (other than pursuant to a Business Combination
which is covered by clause (c) below);

      

      (b) The consummation of the sale or
other disposition (including in whole or in part through licensing
arrangement(s)) of all or substantially all of the Company's assets, other than
sales, other dispositions or licenses of assets made to a parent or a
wholly-owned subsidiary of the Company, or an entity under common control with
the Company;

      

      (c) The consummation of a
reorganization, merger, statutory share exchange or consolidation or similar
transaction involving the Company or the acquisition of assets or stock of
another entity by the Company or any of its subsidiaries, or a series of related
such transactions (each, a "Business Combination"), in each case unless
following such Business Combination (i) the voting securities of the Company
outstanding immediately prior thereto continue to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity
or any entity (a "Parent") that, as a result of such transaction, owns the
Company or the surviving entity or all or substantially all of the Company's or
surviving entity's assets directly or through one or more subsidiaries) at least
fifty percent (50%) of the total voting power represented by the voting
securities of the Company or such surviving entity or Parent outstanding
immediately after such Business Combination; (ii) no person (excluding any
entity resulting from such Business Combination or a Parent or any employee
benefit plan (or related trust) of the Company or such entity resulting from
such Business Combination or Parent) beneficially owns, directly or indirectly,
50% or more of, respectively, the then-outstanding shares of common stock of the
entity resulting from such Business Combination or the total voting power of the
then-outstanding voting securities of such entity, except to the extent that the
ownership in excess of 50% existed prior to the Business Combination; and (iii)
at least a majority of the members of the board of directors of the entity
resulting from such Business Combination or the Parent thereof were members of
the Incumbent Board (as defined below) at the time of the execution of the
initial agreement or of the action of the Board providing for such Business
Combination;

      

      
        
           

        

        
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      (d) Individuals who, as of the
Effective Date, constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the Effective Date whose
appointment, election, or nomination for election by the Company's stockholders,
was approved by a vote of at least two-thirds of the directors then comprising
the Incumbent Board (including for these purposes, the new members whose
appointment, election or nomination was so approved, without counting the member
and his or her predecessor twice) shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or

      

      (e) Approval by the stockholders of
the Company of a complete liquidation or dissolution of the Company other than
in the context of a transaction or series of related transactions that would not
constitute a Change of Control under clause (c) above.

      

      1.05 A "Change of Control
Termination" shall mean a termination of employment within twelve (12) months
following a Change of Control where (a) the Company or a party effecting a
Change of Control of the Company terminates the Executive's employment without
Cause, other than as the result of the Executive's death or Permanent
Disability, or (b) the Executive resigns with Good Reason.

      

      1.06 "Code" shall mean the Internal
Revenue Code of 1986, as amended.

      

      1.07 "Date of Termination" following
a Change of Control shall mean the dates, as the case may be, for the following
events: (a) if the Executive's employment is terminated by death, the date of
death; (b) if the Executive's employment is terminated due to a Permanent
Disability, thirty (30) days after the Notice of Termination is given (provided
that the Executive shall not have returned to the performance of his or her
duties on a full-time basis during such period); (c) if the Executive's
employment is terminated pursuant to a termination for Cause, the date specified
in the Notice of Termination; (d) if the Executive's employment is terminated by
a Change of Control Termination, the date specified in the Notice of
Termination; and (e) if the Executive's employment is terminated for any other
reason, fifteen (15) days after delivery of the Notice of Termination unless
otherwise agreed by the Executive and the Company.

      

      1.08 "Disability" shall mean that the
Executive is unable, by reason of injury, illness or other physical or mental
impairment, to perform the essential functions of the position for which the
Executive is employed, even with a reasonable accommodation, which inability is
certified by a licensed physician reasonably selected by the
Company.

      

      1.09 "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended.

      

      
        
           

        

        
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      1.10 "Good Reason" shall mean the
occurrence of any of the following, without the Executive's express written
consent, within twelve (12) months following a Change of Control:

      

      (a) The assignment to the Executive
of any positions, duties, responsibilities or status adversely inconsistent or
diminutive, in comparison with, or having less authority than, the Executive's
positions, duties, responsibilities or status with the Company immediately prior
to a Change of Control (including, without limitation, retaining such position,
duties, responsibilities or status when the Company is not a publicly traded
company or not the ultimate parent entity of the group or when the Company has
consummated a transaction constituting a "Change of Control" under Section
1.04(b) above);

      

      (b) An alteration in the nature of
the Executive's reporting responsibilities, titles, or offices with the Company
from those in effect immediately prior to a Change of Control (including,
without limitation, retaining such reporting responsibilities, titles or offices
with the Company when the Company is not a publicly traded company or not the
ultimate parent entity of the group or when the Company has consummated a
transaction constituting a "Change of Control" under Section 1.04(b)
above);

      

      (c) Any removal of the Executive
from, or any failure to reelect the Executive to, any such positions, except in
connection with a termination of the employment of the Executive for Cause,
Permanent Disability, or as a result of the Executive's death;

      

      (d) A reduction by the Company in the
Executive's base salary or annual target bonus in effect immediately prior to a
Change of Control;

      

      (e) Any breach by the Company of any
provision of this Agreement;

      

      (f) The requirement by the Company
that the Executive's principal place of employment be relocated more than thirty
(30) miles from his or her principal place of employment immediately prior to a
Change of Control; or

      

      (g) The Company's failure to obtain a
satisfactory agreement from any successor to assume and agree to perform the
Company's obligations under this Agreement, as contemplated in Section 9.02(b)
hereof.

      

      1.11 "Notice of Termination" shall
mean a written notice which shall indicate the termination provision(s) relied
upon.

      

      1.12 "Permanent Disability" shall
mean if, as a result of the Executive's Disability, the Executive shall have
been absent from his or her duties with the Company on a full-time basis for a
total of six (6) months of any consecutive eight (8) month period.

      

      
        
           

        

        
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      1.13 "Separation from Service” means
the date upon which the Executive dies, retires, or otherwise has a termination
of employment with the Company that constitutes a “separation from service”
within the meaning of Treasury Regulation Section 1.409A-1(h)(1), without regard
to the optional alternative definitions available thereunder. To the greatest
extent permissible consistent with Section 409A, a Separation from Service shall
include shall any termination of the employee-employer relationship between the
Executive and the Company for any reason, voluntary or involuntary, with or
without Cause, including, without limitation, a termination by reason of
resignation (whether for Good Reason or otherwise), discharge (with or without
Cause), Permanent Disability, death or retirement.

      

      1.14 "Willful" shall mean not in good
faith and without reasonable belief that an act or omission was in the best
interest of the Company.

      

      2.              TERM.
This Agreement shall be effective until either mutually terminated by the
parties or upon a termination of Executive's employment that does not constitute
a Change of Control Termination, subject to a maximum term of ten (10) years
from the Effective Date.

      

      3.              EQUITY
AWARDS.  Upon the occurrence of a Change of Control, for purposes of
the Executive's vesting in any stock option or other stock award granted by the
Company to the Executive that is outstanding at that time (each, an “Outstanding
Award”), the Executive shall be deemed to have completed one additional year of
vesting service as of such Change of Control date. Any portion of an Outstanding
Award that vests as a result of such additional year of vesting service shall be
deemed to be vested as of the Change of Control date. Any portion of such
Outstanding Award that has not vested after giving effect to the foregoing
sentence shall continue to vest in accordance with the terms of the applicable
award agreement but subject to the Executive's additional year of deemed vesting
service. (For example, if a Change of Control occurred on October 1, 2005 and an
Outstanding Award were scheduled to vest in three equal installments on January
1, 2006, January 1, 2007 and January 1, 2008, the January 1, 2006 installment
would vest as of the date of the Change of Control as a result of the deemed
extra year of vesting service, and the remaining two installments would, after
giving effect to the additional year of vesting service, be deemed to vest on
January 1, 2006 and January 1, 2007.)

      

      4.              TERMINATION
OF EMPLOYMENT OF EXECUTIVE.

      

      4.01 GOOD REASON. Notwithstanding
anything contained in any employment agreement between the Executive and the
Company to the contrary, during the term of this Agreement the Executive may
terminate his or her employment with the Company for Good Reason and be entitled
to the benefits set forth in Section 5, provided that the Executive gives
written notice to the Administrator advising the Company of such resignation and
the reason for such resignation within sixty (60) days after the time he or she
becomes aware of the existence of facts or circumstances constituting Good
Reason.

      

      
        
           

        

        
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      4.02 NOTICE OF TERMINATION. Any
termination of the Executive's employment by the Company or by the Executive
(other than termination based on the Executive's death) following a Change of
Control shall be communicated by the terminating party in a Notice of
Termination to the other party hereto.

      

      5.              COMPENSATION
AND BENEFITS UPON TERMINATION OF EMPLOYMENT.

      

      5.01 SEVERANCE BENEFITS. If there is
a Change of Control Termination, then the Executive shall receive the following
severance benefits. The severance benefits set forth below shall be in addition
to any amounts owed to Executive as earned but unpaid wages through the Date of
Termination and accrued but unused vacation through the Date of
Termination:

      

      (a) In lieu of any further severance
payments to the Executive except as expressly contemplated hereunder, payment in
cash as severance pay to the Executive an amount equal to the sum of (i) [____
(___)] times the Executive's annual base salary plus (ii) [___]% of the
Executive's annual target bonus in effect for the calendar year in which the
Change of Control Termination occurs. For purposes of this Agreement, base
salary shall be defined as the greater of (i) the Executive's base salary at the
time of the Change of Control or (ii) the Executive's base salary at the time of
the Change of Control Termination. Such cash payments shall be payable in a
single sum, within ten (10) business days following the Executive's Separation
from Service.

      

      (b) Any stock options or other stock
awards (which term includes without limitation stock appreciation rights,
restricted stock, performance shares, and restricted stock units, whether
payable in cash or stock for purposes of this Agreement) granted to the
Executive by the Company that are outstanding immediately prior to but have not
vested as of the date of the Change of Control Termination shall become 100%
vested as of the date of the Change of Control Termination and any option or
similar award may be exercised by the Executive for one (1) year
(notwithstanding any term of the option providing for exercise within a shorter
period after termination) following the Date of Termination (subject to the
maximum term of the option (generally ten years from the date of grant of the
option) and further subject to any right that the Company may have to terminate
the option in connection with the Change of Control). Notwithstanding
the foregoing, this subsection (b) shall not apply to the performance stock
units awarded to Executive on August 5, 2008; vesting of such performance stock
units shall be governed by the award agreement applicable to such performance
stock units.

      

      (c) For a period of twenty-four (24)
months following the Executive's Date of Termination, the continuation of the
same or equivalent life, health, disability, vision, hospitalization, dental and
other insurance coverage (including equivalent coverage for the Executive's
spouse and dependent children) as the Executive was receiving immediately prior
to the Change of Control.

      

      
        
           

        

        
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      (d) For a period of twelve (12)
months following Executive's Date of Termination, the Company shall, at the
Company's expense, provide for executive-level outplacement services to
Executive, which shall include at least include the following services: (i)
resume assistance, (ii) career evaluation and assessment (iii) individual career
counseling, (iv) financial counseling, (v) access to one or more on-line
employment databases (with research assistance provided), (vi) private office
with telephone, computer and e-mail account set-up and (vii) administrative
support provided Monday through Friday, except for scheduled
holidays.

      

      (e) Equalization Payment. If upon or
following a Change of Control the tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), or any similar or successor tax
(the "Excise Tax") applies, because of the Change of Control, to any payments,
benefits and/or amounts received by Executive as severance benefits or
otherwise, including, without limitation, any amounts received or deemed
received, within the meaning of any provision of the Code, by Executive as a
result of (and not by way of limitation) any automatic vesting, lapse of
restrictions and/or accelerated target or performance achievement provisions, or
otherwise, applicable to outstanding grants or awards to Executive under any of
the Company's equity incentive plans or agreements (collectively, the "Total
Payments"), the Company shall pay in cash to Executive or for Executive's
benefit as provided below an additional amount or amounts (the "Gross-Up
Payment(s)") such that the net amount retained by Executive after the deduction
or payment of any Excise Tax on such Total Payments so received and any Federal,
state and local income and employment taxes and Excise Tax upon the Gross-Up
Payment(s) provided for herein shall be equal to such Total Payments so received
had they not been subject to the Excise Tax. Such Gross-Up Payment(s) shall be
made by the Company to Executive or applicable taxing authority on behalf of
Executive as soon as practicable following the receipt or deemed receipt of any
portion of such Total Payments so received, and may be satisfied by the Company
making a payment or payments on Executive's account in lieu of withholding for
tax purposes but in all events shall be made within thirty (30) days of the
receipt or deemed receipt by Executive of any portion of such Total
Payments.

      

      
        
           

        

        
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      (f) Specified
Employees.  Notwithstanding any provision of this Agreement to the
contrary, if the Executive is a “specified employee” within the meaning of
Treasury Regulation Section 1.409A-1(i) as of the date of the Executive’s
Separation from Service, the Executive shall not be entitled to any payment or
benefit (i) pursuant to Section 5.01(a) or (ii) with respect to any restricted
stock unit that vests pursuant to Section 5.01(b) until the earlier of (1) the
date which is six (6) months after the Executive’s Separation from Service for
any reason other than death, or (2) the date of the Executive’s
death.  Any amounts otherwise payable to the Executive upon or in the
six (6) month period following the Executive’s Separation from Service that are
not so paid by reason of this Section 5.01(f) shall be paid (without interest)
on the first business day after the date that is six (6) months after the
Executive’s Separation from Service (or, if earlier, as soon as practicable, and
in all events within ten (10) business days, after the date of the Executive’s
death).  The payment timing provisions of this Section 5.01(f) shall
only apply if, and to the extent, required to avoid the imputation of any tax,
penalty or interest pursuant to Section 409A of the Code.  It is the
intent of the parties that this Section 5.01(f) shall not be construed to
require or permit a delay in the payment or provision of any benefit or
reimbursement under this Agreement other than (x) the payment under Section
5.01(a), and (y) the payment with respect to any restricted stock unit that
vests pursuant to Section 5.01(b).  Without limiting the generality of
the foregoing sentence, the parties intend that the equity vesting provided in
Section 5.01(b) and the payment or provision of the benefits and reimbursements
provided in Section 5.01(c) and Section 5.01(d) shall not be subject to the
delay described in this Section 5.01(f).

      

      (g) Any payment or reimbursement of
expenses required to be made to the Executive pursuant to Section 5.01(c) or
Section 5.01(d) shall be made promptly, and if the Executive is required under
the terms of the applicable plan or program to request such payment or
reimbursement, no more than ten (10) business days following the date of such
request.  In order to comply with Section 409A of the Code, to the
extent that any payment or reimbursement of expenses made to the Executive
pursuant to Section 5.01(c) or Section 5.01(d) is taxable to the Executive, any
such payment or reimbursement shall be made to the Executive no later than the
earlier of (i) the deadline set forth in the preceding sentence, or (ii) the
last day of the Executive’s taxable year following the taxable year in which the
related expense was incurred.  The foregoing sentence shall not be
construed to require or permit a delay in any such payment or
reimbursement.  The Executive’s right to any such payment or
reimbursement or any benefit pursuant to Section 5.01(c) or Section 5.01(d) is
not subject to liquidation or exchange for another benefit and the amount of
such benefits that the Executive receives in one taxable year shall not affect
the amount of such benefits that the Executive receives in any other taxable
year.

      

      
        
           

        

        
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      6.              NO
MITIGATION. The Executive shall not be required to mitigate the amount of any
payments provided for by this Agreement by seeking employment or otherwise, nor
shall the amount of any cash payments or benefits provided under this Agreement
be reduced by any compensation or benefits earned by the Executive after his or
her Date of Termination. Notwithstanding the foregoing, if the Executive is
entitled, by operation of any applicable law, to unemployment compensation
benefits or benefits under the Worker Adjustment and Retraining Act of 1988
(known as the "WARN" Act) in connection with the termination of his or her
employment in addition to amounts required to be paid to him or her under this
Agreement, then to the extent permitted by applicable statutory law governing
severance payments or notice of termination of employment, the Company shall be
entitled to offset the amounts payable hereunder by the amounts of any such
statutorily mandated payments.

      

      7.              LIMITATION
ON RIGHTS.

      

      7.01 NO EMPLOYMENT CONTRACT. This
Agreement shall not be deemed to create a contract of employment between the
Company and the Executive and shall not create any right in the Executive to
continue in the Company's employment for any specific period of time. This
Agreement shall not restrict the right of the Company to terminate the
employment of Executive for any reason, or no reason at all, or restrict the
right of the Executive to terminate his or her employment.

      

      7.02 NO OTHER EXCLUSIONS. This
Agreement shall not be construed to exclude the Executive from participation in
any other compensation or benefit programs in which he or she is specifically
eligible to participate either prior to or following the Effective Date of this
Agreement, or any such programs that generally are available to other executive
personnel of the Company.

      

      
        
           

        

        
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      8.              DISPUTE
RESOLUTION.

      

      8.01 ARBITRATION. Any controversy
arising out of or relating to this Agreement, its enforcement, arbitrability or
interpretation, or because of an alleged breach, default, or misrepresentation
in connection with any of its provisions, or any other controversy arising out
of or relating in any way to the subject matter contained herein, shall be
submitted to final and binding arbitration. Any arbitration hereunder shall be
in Santa Clara County, California before a sole arbitrator selected from
Judicial Arbitration and Mediation Services, Inc., or its successor ("JAMS"), or
if JAMS is no longer able to supply the arbitrator, such arbitrator shall be
selected from the American Arbitration Association, and shall be conducted in
accordance with the provisions of California Code of Civil Procedure Sections
1280 et seq. as the exclusive forum for the resolution of such dispute. Pursuant
to California Code of Civil Procedure Section 1281.8, provisional injunctive
relief may, but need not, be sought by either party to this Agreement in a court
of law while arbitration proceedings are pending, and any provisional injunctive
relief granted by such court shall remain effective until the matter is finally
determined by the Arbitrator. Final resolution of any dispute through
arbitration may include any remedy or relief which the Arbitrator deems just and
equitable, including any and all remedies provided by applicable state or
federal statutes. At the conclusion of the arbitration, the Arbitrator shall
issue a written decision that sets forth the essential findings and conclusions
upon which the Arbitrator's award or decision is based. Any award or relief
granted by the Arbitrator hereunder shall be final and binding on the parties
hereto and may be enforced by any court of competent jurisdiction. The parties
acknowledge and agree that they are hereby waiving any rights to trial by jury
in any action, proceeding or counterclaim brought by either of the parties
against the other in connection with any matter whatsoever arising out of or in
any way connected with this Agreement or the subject matter contained herein.
The parties further agree that in any proceeding to enforce the terms of this
Agreement, the nonprevailing party shall pay (1) the prevailing party's
reasonable attorneys' fees and costs incurred in connection with resolution of
the dispute in addition to any other relief granted, and (2) all costs of the
arbitration, including, but not limited to, the arbitrator's fees, court
reporter fees, and any and all other administrative costs of the arbitration,
and that the nonprevailing party promptly shall reimburse the prevailing party
for any portion of such costs previously paid by the prevailing party. The
arbitrator shall resolve any dispute as to the reasonableness of any fee or
cost.

      

      
        
           

        

        
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      9.              MISCELLANEOUS.

      

      9.01 ADMINISTRATION. The
Administrator shall administer this Agreement and the benefits provided for
herein.

      

      9.02 ASSIGNMENT AND BINDING
EFFECT.

      

      (a)
No right or interest to or in this Agreement, or any payment or benefit to the
Executive under this Agreement shall be assignable by the Executive except by
will or the laws of descent and distribution. No right, benefit or interest of
the Executive hereunder shall be subject to anticipation, alienation, sale,
assignment, encumbrance, charge, pledge, hypothecation or set off in respect of
any claim, debt or obligation, or to execution, attachment, levy or similar
process or assignment by operation of law. Any attempt, voluntarily or
involuntarily, to effect any action specified in the immediately preceding
sentences shall, to the full extent permitted by law, be null, void and of no
effect; provided, however, that this provision shall not preclude the Executive
from designating one or more beneficiaries to receive any amount that may be
payable to the Executive under this Agreement after his or her death and shall
not preclude the legal representatives of the Executive's estate from assigning
any right hereunder to the person or persons entitled thereto under his or her
will, or, in the case of intestacy, to the person or persons entitled thereto
under the laws of intestacy applicable to his or her estate. However, this
Agreement shall be assignable by the Company to, binding upon and inure to the
benefit of any successor of the Company, and any successor shall be deemed
substituted for the Company upon the terms and subject to the conditions
hereof.

      

      (b)
The Company will require any successor (whether by purchase of assets, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform all of the
obligations of the Company under this Agreement (including the obligation to
cause any subsequent successor to also assume the obligations of this Agreement)
unless such assumption occurs by operation of law.

      

      9.03 NO WAIVER. No waiver of any
term, provision or condition of this Agreement, whether by conduct or otherwise,
in any one or more instances shall be deemed or construed as a further or
continuing waiver of any such term, provision or condition or as a waiver of any
other term, provision or condition of this Agreement. Without limiting the
generality of the foregoing, the failure by Executive to exercise his or her
right to terminate his or her employment for Good Reason under Section 4.01
above shall not operate as a waiver by Executive of his or her right to
terminate for Good Reason based upon any subsequent act or omission of the
Company that constitutes Good Reason.

      

      
        
           

        

        
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      9.04 RULES OF
CONSTRUCTION.

      

      (a)
This Agreement has been executed in, and shall be governed by and construed in
accordance with the laws of the State of California without regard to the
principles of conflict of laws.

      

      (b)
Captions contained in this Agreement are for convenience of reference only and
shall not be considered or referred to in resolving questions of interpretation
with respect to this Agreement.

      

      (c)
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under any present or future law, and if the rights or obligations
of any party hereto will not be materially or adversely affected thereby, (i)
such provision will be fully severable, (ii) this Agreement will be construed
and enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, (iii) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal, invalid
or unenforceable provision or by its severance herefrom and (iv) in lieu of such
illegal, invalid or unenforceable provision, there will be added automatically
as a part of this Agreement a legal, valid and enforceable provision as similar
in terms to such illegal, invalid or unenforceable provision as may be
possible.

      

      (d)
Each party has cooperated in the drafting and preparation of this Agreement.
Hence, in any construction to be made of this Agreement, the same shall not be
construed against any party on the basis that the party was the
drafter.

      

      (e)
It is intended that any amounts payable under this Agreement shall either be
exempt from or comply with Section 409A of the Code (including the Treasury
regulations and other published guidance relating thereto) so as not to subject
the Executive to payment of any additional tax, penalty or interest imposed
under Section 409A.  The provisions of this Agreement shall be
construed and interpreted to avoid the imputation of any such additional tax,
penalty or interest under Section 409A yet preserve (to the nearest extent
reasonably possible) the intended benefit payable to the
Executive.  The Executive shall be solely responsible for his or her
own tax liability with respect to payment made or benefits provided pursuant to
this Agreement.  Notwithstanding anything else contained herein to the
contrary, nothing in this Agreement is intended to constitute, nor does it
constitute, tax advice, and in all cases, the Executive should obtain and rely
solely on the tax advice provided by the Executive’s own independent tax
advisors (and not the Company, any of the Company’s affiliates, or any officer,
employee or agent of the Company or any of its affiliates).

      

      
        
           

        

        
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12 -

          
            

          

        

        
           

        

      

      9.05 NOTICES. Any notice required or
permitted by this Agreement shall be in writing, delivered by hand or sent by
registered or certified mail, return receipt requested, postage prepaid, or by a
nationally recognized courier service (regularly providing proof of delivery) or
by facsimile or telecopy, addressed to the Board and the Company and, if other
than the Board, the Administrator, at the Company's then principal office, or to
the Executive at the address set forth in the records of the Company, as the
case may be, or to such other address or addresses the Company or the Executive
may from time to time specify in writing. Notices shall be deemed given: (i)
when delivered if delivered personally (including by courier); (ii) on the third
day after mailing, if mailed, postage prepaid, by registered or certified mail
(return receipt requested); (iii) on the day after mailing if sent by a
nationally recognized overnight delivery service which maintains records of the
time, place, and recipient of delivery; and (iv) upon receipt of a confirmed
transmission, if sent by telecopy or facsimile transmission.

      

      9.06 MODIFICATION. This Agreement may
be modified only by an instrument in writing signed by the Executive and an
authorized representative of the Company.

      

      9.07 ENTIRE AGREEMENT. This Agreement
constitutes the entire agreement between the Company and the Executive
concerning the subject matter hereof, and supersedes all other agreements,
whether written or oral, with respect to such subject matter (including, without
limitation, the Prior Change of Control Agreement). This is an integrated
agreement.

      

      9.08 COUNTERPARTS. This Agreement may
be executed in counterparts, and each counterpart, when executed, shall have the
efficacy of a signed original. Photographic copies of such signed counterparts
may be used in lieu of the originals for any purpose.

      

      9.09 GOOD FAITH DETERMINATIONS. No
member of the Board shall be liable, with respect to this Agreement, for any
act, whether of commission or omission, taken by any other member of the Board
or by any officer, agent, or employee of the Company, nor, excepting
circumstances involving his or her own bad faith, for anything done or omitted
to be done by himself or herself. The Company shall indemnify and hold harmless
each member of the Board from and against any liability or expense hereunder,
except in the case of such member's own bad faith.

      

      
        	
                SANDISK
      CORPORATION,

              	
                EXECUTIVE

              
	
                a
      Delaware corporation

              	 
      
	 
      	 
      
	
                By:
      _________________________________

              	
                _____________________________

              
	
                Name:  Eli
      Harari

              	
                Name:

              
	
                Title: Chairman
      and CEO

              	 
      
	 
      	 
      

      

      

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13 -

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