SanDisk 2003 Annual Report Download - page 58

conÑdence. This could have a signiÑcant impact on our operating results, revenues and costs and may result in
increased volatility in the market price of our common stock.
Recently enacted and proposed changes in securities laws and regulations are likely to increase our costs.
The Sarbanes-Oxley Act of 2002 that became law in July 2002 required changes in our corporate
governance, public disclosure and compliance practices. The act also required the SEC to promulgate new
rules on a variety of subjects. In addition to Ñnal rules and rule proposals already made, Nasdaq has proposed
additional revisions to its requirements for companies that are Nasdaq-listed. We expect these developments
to increase our legal and Ñnancial compliance costs, and to make some activities more diÇcult, such as
stockholder approval of new option plans. We expect these developments to make it more diÇcult and more
expensive for us to obtain director and oÇcer liability insurance, and we may be required to accept reduced
coverage or incur substantially higher costs to obtain coverage. These developments could make it more
diÇcult for us to attract and retain qualiÑed members of our board of directors, particularly to serve on our
audit committee, and qualiÑed executive oÇcers. We are presently evaluating and monitoring regulatory
developments and cannot estimate the timing or magnitude of additional costs we may incur as a result.
Risks Related to Our Charter Documents, Stockholder Rights Plan, Our Stock Price, Our Debt Rating
and the Raising of Additional Financing
Anti-takeover provisions in our charter documents, stockholder rights plan and in Delaware law could
prevent or delay a change in control and, as a result, negatively impact our stockholders.
We have taken a number of actions that could have the eÅect of discouraging a takeover attempt. For
example, we have a stockholders' rights plan that would cause substantial dilution to a stockholder, and
substantially increase the cost paid by a stockholder, who attempts to acquire us on terms not approved by our
board of directors. This could prevent us from being acquired. In addition, our certiÑcate of incorporation
grants our board of directors the authority to Ñx the rights, preferences and privileges of and issue up to
4,000,000 shares of preferred stock without stockholder action (2,000,000 of which have already been reserved
under our stockholder rights plan). Although we have no present intention to issue shares of preferred stock,
such an issuance could have the eÅect of making it more diÇcult and less attractive for a third-party to
acquire a majority of our outstanding voting stock. Preferred stock may also have other rights, including
economic rights senior to our common stock that could have a material adverse eÅect on the market value of
our common stock. In addition, we are subject to the anti-takeover provisions of Section 203 of the Delaware
General Corporation Law. This section provides that a corporation may not engage in any business
combination with any interested stockholder during the three-year period following the time that a stockholder
became an interested stockholder. This provision could have the eÅect of delaying or preventing a change of
control of SanDisk.
Our stock price has been, and may continue to be, volatile, which could result in investors losing all or part
of their investments.
The market price of our stock has Öuctuated signiÑcantly in the past and is likely to continue to Öuctuate
in the future. For example, in the 12 months ended December 28, 2003, our stock price Öuctuated signiÑcantly
from a low of $7.39 to a high of $43.15. We believe that such Öuctuations will continue as a result of future
announcements concerning us, our competitors or principal customers regarding technological innovations,
new product introductions, governmental regulations, litigation or changes in earnings estimates by analysts.
In addition, in recent years the stock market has experienced signiÑcant price and volume Öuctuations and the
market prices of the securities of high technology and semiconductor companies have been especially volatile,
often for reasons outside the control of the particular companies. These Öuctuations as well as general
economic, political and market conditions may have an adverse aÅect on the market price of our common
stock.
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