SanDisk 2006 Annual Report Download - page 140

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investment plans. SanDisk IL Ltd. has elected the “alternative benefits” track and has waived government grants in
return for tax benefits.
This status allows SanDisk IL Ltd. a four year tax exemption on undistributed earnings for investment plans
commencing prior to or during 1996 and two year tax exemption on plans commencing after 1996, followed by a
reduced rate of corporate income tax of 10%-25% for the remaining six or eight-year benefit periods respectively.
Following SanDisk’s acquisition of SanDisk IL Ltd. the reduced corporate tax rate is expected to be 10%. Benefits
relating to these investment plans will expire in fiscal years 2006 through 2015. In addition, under an agreement
reached with the Israeli tax authorities, the proportionate share of income attributable to an Approved Enterprise
facility acquired from Fortress V&T Ltd. in 2000 is subject to a 10-year tax exemption.
Income from sources other than the Approved Enterprise during the benefit period will be subject to tax at the
standard Israeli corporate tax rates.
An amendment to the Capital Investments Law came into effect on April 1, 2005 and has significantly changed
the provisions of the Capital Investments Law. However, SanDisk IL Ltd.’s existing Approved Enterprise plans
which were approved prior to these changes in the Capital Investments Law will generally not be subject to the
provisions of this amendment to the Capital Investments Law.
The entitlement to the above benefits is conditional upon SanDisk IL Ltd. fulfilling the conditions stipulated by
the Capital Investments Law, regulations published thereunder and the instruments of approval for the specific
investments in Approved Enterprises. In the event of failure to comply with these conditions, the benefits may be
cancelled and SanDisk IL Ltd. may be required to refund the amount of the benefits, in whole or part, including
interest.
Note 12: Stockholders’ Rights Plan
On September 15, 2003, the Company amended its existing stockholder rights plan to terminate the rights
issued under that rights plan, and the Company adopted a new rights plan. Under the new rights plan, rights were
distributed as a dividend at the rate of one right for each share of common stock of the Company held by
stockholders of record as of the close of business on September 25, 2003. The rights will expire on April 28, 2007
unless redeemed or exchanged. Under the new rights agreement and after giving effect to the Company’s stock
dividend effected on February 18, 2004, each right will, under the circumstances described below, entitle the
registered holder to buy one two-hundredths of a share of Series A Junior Participating Preferred Stock for $225.00.
The rights will become exercisable only if a person or group acquires beneficial ownership of 15% or more of the
Company’s common stock or commences a tender offer or exchange offer upon consummation of which such
person or group would beneficially own 15% or more of the Company’s common stock.
Annual Report
F-41
Notes to Consolidated Financial Statements — (Continued)