Title of each class
to be so registered

Name of each exchange on which
 each class is to be registered 

Exhibit
Number

Exhibit Description

 2.1*

 3.1*

 3.2*

10.1*

10.2*

10.3*

10.4*

10.5*

10.6*

10.7##

10.8##

10.9##

10.10##

Exhibit
Number

Exhibit Description

10.11##

10.12##

10.13##

10.14##

10.15##

10.16##

10.17##

10.18##

10.19##

10.20##

Operating Agreement of Flash Partners Ltd., dated as of September 10, 2004, by and between

Toshiba Corporation and SanDisk International Limited.

10.21##

10.22##

10.23##

10.24##

10.25##

10.26*

10.27*

10.28*

Exhibit
Number

Exhibit Description

10.29*

10.30*

10.31*

10.32*

10.33*

10.34*

10.35*

10.36*

10.37*

10.38*

10.39*

10.40*

10.41*

Offer Letter, dated as of July 1, 2024, to Luis Felipe Visoso Lomelin

21.1

99.1

99.2*

To be filed by amendment.

As permitted by Regulation S-K, Item 601(b)(10)(iv) of the Securities Exchange Act of 1934, as amended, certain confidential portions of this exhibit have been redacted from the publicly filed document.

Table of Contents

Definitions and Interpretation

Closing and Post-Closing Transaction

Purpose of Flash Alliance

Representations and Warranties of the Parties

Covenants

Covenants concerning NAND Flash Memory Products Business

Other Agreements

Termination

Miscellaneous

DEFINITIONS AND INTERPRETATION.

Certain Definitions.

Capitalized terms used but not defined in this Agreement shall have the respective meanings assigned to them in Appendix A (Definitions, Rules of Construction and General Terms and Conditions).

As used herein, the term “Agreement” means this Flash Alliance Master Agreement together with any Exhibits, Schedules, Appendices and Attachments hereto.

Additional Definitions. The following capitalized terms used in this Agreement shall have the respective meanings assigned in this Agreement:

Term

Defined In

Term

Defined In

Term

Defined In

Rules of Construction and Documentary Conventions. The rules of construction and documentary conventions and general terms and conditions set forth in Appendix A shall apply to this Agreement.

Precedence. The terms and provisions of this Agreement are binding on the Parties; provided, however, that to the extent that a description in this Agreement of another agreement (whether an FA Operative Document or otherwise) conflicts with or differs from the provisions of that agreement, then the provisions of that agreement shall control as to such conflict or difference.

CLOSING AND POST-CLOSING TRANSACTIONS

Closing Transactions.

Closing. The Parties shall effect the transactions set forth in this Section 2.1, all of which shall be considered to occur on the date hereof unless otherwise stipulated (the effecting of such transactions, collectively, the “Closing”).

Flash Alliance Documents. Unless otherwise indicated in this Section 2.1(b), as of the Closing Date, the Parties shall enter into or cause to be entered into or otherwise become effective the following agreements and documents (collectively with this Agreement, the “FA Operative Documents”) to apply to their joint development, manufacture and selling of Y4 NAND Flash Memory Products by and through Flash Alliance, Ltd., a Japanese tokurei yugen kaisha (“Flash Alliance”) (the description of each document below is for reference only and shall not be used in interpreting any such document):

a Share Purchase Agreement between Toshiba and SanDisk Ireland, dated as of the date hereof, in the form of Exhibit A1 (the “Share Purchase Agreement”), and which concerns the sale by Toshiba and purchase by SanDisk Ireland at the Closing of 49.9% of the FA Shares;

an Operating Agreement between Toshiba and SanDisk Ireland, dated as of the date hereof, in the form of Exhibit A2 (the “FA Operating Agreement”), and which concerns governance of Flash Alliance;

Articles of Incorporation of Flash Alliance in the form of Exhibit A to the FA Operating Agreement;

a Foundry Agreement, dated as of the date hereof, between Flash Alliance and Toshiba in the form of Exhibit A3 (the “FA Foundry Agreement”);

a Purchase and Supply Agreement, dated as of the date hereof, by and between Flash Partners and SanDisk Ireland, in the form of Exhibit A4-1 (the “SanDisk Purchase and Supply Agreement”) and a Purchase and Supply Agreement, dated as of the date hereof, between Flash Alliance and Toshiba in the form of Exhibit A4-2 (the “Toshiba Purchase and Supply Agreement” and together with the SanDisk Purchase and Supply Agreement, the “Purchase and Supply Agreements”), and which concern the forecasting and purchase commitments by SanDisk Ireland and Toshiba, respectively, of Y4 NAND Flash Memory Products;

a Patent Indemnification Agreement between SanDisk Corporation, [***] and Toshiba, dated as of the date hereof, in the form of Exhibit A5 (the “FA Patent Indemnification Agreement”), and which concerns patent indemnification obligations of Toshiba in favor of SanDisk, and certain contribution obligations of SanDisk with respect to Y4 NAND Flash Memory Products;

a Mutual Contribution and Environmental Indemnification Agreement between SanDisk Ireland and Toshiba, dated as of the date hereof, in the form of Exhibit A6 (the “Environmental Indemnification Agreement”), and which concerns indemnification obligations of the parties thereto in favor of one another with respect to Flash Alliance and the Yokkaichi Facility;

a Lease Agreement between Flash Alliance and Toshiba, as owner of the Yokkaichi Facility, dated as of the date hereof, in the form of Exhibit A7 (the “Lease Agreement”), and which concerns the leasing of Flash Alliance’s equipment to Toshiba as owner of the Yokkaichi Facility;

a Services Agreement between SanDisk Ireland and Toshiba, dated as of the date hereof, in the form of Exhibit A8 (“Toshiba-SanDisk Ireland Services Agreement”), and which concerns Toshiba’s provision of certain services to SanDisk and SanDisk Ireland’s payment to Toshiba for such services;

a Services Agreement between Flash Alliance and Toshiba, as owner of the Yokkaichi Facility, dated as of the date hereof, in the form of Exhibit A9 (the “Toshiba-Flash Alliance Services Agreement”), and which concerns Toshiba’s provision of certain services to Flash Alliance and Flash Alliance’s payment to Toshiba for such services; and

a Services Agreement between Flash Alliance and SanDisk Ireland, dated as of the date hereof, in the form of Exhibit A10 (“SanDisk Ireland-Flash Alliance Services Agreement”), and which concerns SanDisk Ireland’s provision of certain services to Flash Alliance and Flash Alliance’s payment to SanDisk Ireland for such services.

Joint Operative Documents. The Parties acknowledge and agree that the following agreements shall remain in force or be amended or executed as indicated below and shall apply generally to the Parties’ collaboration with respect to NAND Flash Memory Products and related products (collectively, the “Joint Operative Documents”):

the Second Amended and Restated Common R&D and Participation Agreement, dated as of the date hereof, between SanDisk Corporation and Toshiba (the “Common R&D Agreement”), a copy of which is Exhibit B1 and which concerns collaboration between the Parties with respect to research and development activities;

the Second Amended and Restated Product Development Agreement, dated as of the date hereof, between the SanDisk Corporation and Toshiba (the “Product Development Agreement”), a copy of which is Exhibit B2 and which concerns collaboration between the Parties with respect to product development activities; and

an Amendment No. 4 to Patent Cross License Agreement, dated as of the date hereof, between SanDisk Corporation and Toshiba (the “Amendment No. 4 to Patent Cross License Agreement”), a copy of which is Exhibit B3, amending that certain Patent Cross License Agreement between SanDisk Corporation and Toshiba, dated as of July 30, 1997 (as amended by Amendment No. 1 to Patent Cross License Agreement, dated as of May 9, 2000, Amendment No. 2 to Patent Cross License Agreement, dated as of April 10,

Further Assurances. Following the Closing, each Party shall, and shall cause its Affiliates and Flash Alliance to, take all reasonable actions necessary or appropriate to effectuate the transactions contemplated by this Agreement, the FA Operative Documents and the Joint Operative Documents (collectively, the “Master Operative Documents”), and to obtain (and cooperate with the other Party in obtaining) any Governmental Action or third party consent required to be obtained or made by it in connection with any of the transactions contemplated by the Master Operative Documents; provided, that no Burdensome Condition shall be made to exist with respect to such Party or any of its Affiliates in connection therewith.

Continuation of FVC Japan and FP Documents. The Parties agree that unless otherwise expressly stated herein (A) neither the FVC Japan Operative Documents nor the FP Operative Documents shall affect the interpretation of this Agreement, the governance or operation of Flash Alliance or the Y4 Facility and (B) the FA Operative Documents shall not affect the interpretation of the FVC Japan Master Agreement, the FP Master Agreement, the governance or operation of FVC Japan or the FVC Japan Equipment or the governance or operation of Flash Partners; provided, however, that Section 6.3(c)(iv) of the FP Master Agreement is hereby amended to preclude expansion under Section 6.4(a)(ii)(c) of the FP Master Agreement.

PURPOSE OF FLASH ALLIANCE

Purpose. The Parties acknowledge and agree that the purpose of the Master Operative Documents and Flash Alliance is the manufacture, including by subcontract to Toshiba pursuant to the FA Foundry Agreement, and sale to Toshiba and SanDisk Ireland of NAND Flash Memory Products manufactured at the facility of Flash Alliance known by the Parties as “Y4” (the “Y4 Facility”), which is a part of the Yokkaichi Facility (defined in Appendix A).

NAND Flash Memory Products. “NAND Flash Memory Products” are NAND (both binary and MLC Flash Memory) Flash Memory Integrated Circuits (“ICs”), excluding any products with process design rules generally greater than .25 microns. Embedded IC’s incorporating NAND Flash Memory Products shall be considered to constitute “NAND Flash Memory Products” if the main function and value of such IC is flash memory, but shall not be considered to constitute “NAND Flash Memory Products” if the main function and value of such IC is logic. For the purpose of the foregoing, the “main function and value” of any product shall be considered to be flash memory if (x) the total NAND flash memory array area is greater than [***] of the total die area or (y) the product is a cut-down or derivative of a standard NAND Flash Memory Product.

Products.

NAND Flash Memory Products manufactured at the Y4 Facility are referred to as “Y4 NAND Flash Memory Products;” NAND Flash Memory Products manufactured at the Y3 Facility are referred to as “Y3 NAND Flash Memory Products;” NAND Flash Memory Products manufactured for FVC Japan using the FVC Japan Equipment are referred to as “FVC Japan NAND Flash Memory Products;” and NAND Flash Memory Products manufactured at the Toshiba Foundry Facility (defined in Appendix A) are referred to as “Toshiba Foundry NAND Flash Memory Products”.

Each Party shall be permitted to market and sell all NAND Flash Memory Products to any third party in any form, including chips, packaged devices, wafers, die and cards.

REPRESENTATIONS AND WARRANTIES OF THE PARTIES

Organization, Ownership Interest, etc.

It and each of its Affiliates that is a party to any Master Operative Document is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization or incorporation and has the power and authority to carry on its business as conducted on the date hereof, to own or hold under lease its properties and to enter into and perform its obligations under each Master Operative Document to which it is a party.

It and each of its Affiliates that is a party to any Master Operative Document is duly qualified to own or lease its properties and generally to conduct its business as currently, or proposed under the Master Operative Documents to be, conducted in each jurisdiction necessary for purposes of the transactions contemplated by the Master Operative Documents, except where failure to so qualify would not have a material adverse effect on either Party or Flash Alliance.

Authorization; No Conflict.

It and each of its Affiliates has duly authorized by all necessary action (i) the execution, delivery and performance of each Master Operative Document to which it or any of its Affiliates is a party and (ii) the exercise of its rights as a holder of shares (kabushiki) of Flash Alliance (the “FA Shares”) to approve the execution, delivery and performance by Flash Alliance of each Master Operative Document to which it is a party and for which the approval of the holders of FA Shares is required.

Its and each of its Affiliates’ execution and delivery of each Master Operative Document to which it is a party, its and each of its Affiliates’ consummation of the transactions contemplated thereby and its and each of its Affiliates’ compliance therewith does not and will not (i) require any approval of its or any of such Affiliates’ stockholders or any approval or consent of any trustee or holder of any of its or any of such Affiliates’ Indebtedness or obligations, (ii) contravene any Governmental Rule applicable to or binding on it or any of such Affiliates or any of its or their properties if such contravention would have a material adverse effect on it or any of such Affiliates or on its or their ability to perform any of its or any of such Affiliates’ obligations under any Master Operative Document, (iii) contravene or result in any breach of, or constitute any default, with or without the passage of time, the giving of notice or both, under its charter or by-laws, or contravene or result in any breach of or constitute any default under, or result in the creation of any Lien (other than Permitted Liens) upon any of its or any of such Affiliates property or the property of Flash Alliance under, any material indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, loan or credit agreement, non-compete agreement, license agreement, partnership or joint venture agreement or other material agreement or document to which it or any of such Affiliates is a party or by which it or any of such Affiliates or any of its or their properties is or is intended to be bound or by which Flash Alliance or any of its properties is or is intended to be bound, (iv) require any negotiation with, or notice to, any labor union or violate, or require any procedure to be followed under, any collective bargaining or other agreement with employees or (v) require any Governmental Action (other than immaterial

Enforceability.

It has duly executed and delivered this Agreement and, upon the execution and delivery of this Agreement by the other Party, this Agreement will constitute its legal, valid and binding obligation, enforceable against it in accordance with its terms except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance or similar laws affecting the enforcement of creditors’ rights generally or the availability of equitable remedies (regardless of whether enforceability is considered in a proceeding at law or in equity).

It and each of its Affiliates have duly executed and delivered each other Master Operative Document to which it or any such Affiliate is a party and, upon the execution and delivery of each such other Master Operative Document by each other party thereto, each such other Master Operative Document will constitute its legal, valid and binding obligation, enforceable against it or its Affiliates in accordance with its terms except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance or similar laws affecting the enforcement of creditors’ rights generally or the availability of equitable remedies (regardless of whether enforceability is considered in a proceeding at law or in equity).

Proceedings. There are no actions, claims, investigations or proceedings pending, or to its knowledge threatened, by or before any Governmental Authority that, if adversely determined, would have a material adverse effect on it or any of its Affiliates that is a party to any Master Operative Document or, on the conduct of the business of Flash Alliance following the Closing as contemplated in the Master Operative Documents or on it or any of its Affiliates’ ability to perform any material obligation under any Master Operative Document.

Litigation; Decrees. Except as set forth in Schedule 4.5, there are no lawsuits, arbitrations or other legal proceedings pending, or to its knowledge threatened, by or against or affecting it or any of its Affiliates or any of their respective properties that (i) are reasonably likely, based on information known to it as of the date hereof, to have a material adverse effect on the conduct of the business of Flash Alliance following the Closing as contemplated by the Master Operative Documents or (ii) relate to any of the transactions contemplated by the Master Operative Documents in a manner which is material to it, any of its Affiliates’ or Flash Alliance’s ability of it to carry out the transactions contemplated hereby and in the FA Operative Documents or which could have a material adverse effect on the conduct of the business of Flash Alliance following the Closing as contemplated in the Master Operative Documents.

Compliance with Other Instruments. Neither it nor any of its Affiliates that is a party to any Master Operative Document is in default in any material respect in the performance of any material obligation, agreement, instrument or undertaking to which it or any of its Affiliates is a party or by which it or any of its Affiliates or any of its of their properties is bound, and there is no such obligation, agreement, instrument or undertaking to which it or any of its Affiliates is a party or by which it or any of its Affiliates or any of its or their properties is bound, in each case which is reasonably likely to have a material adverse effect on the conduct of the business of Flash Alliance following the Closing as contemplated by the Master Operative Documents.

Patents and Proprietary Rights. Except as set forth in Schedule 4.7, to its knowledge, it owns or possesses sufficient legal rights to all patents, utility models, trademarks, service marks, trade names, copyrights, applications for any of the foregoing, mask works, software, trade secrets, licenses, information and proprietary rights and processes (collectively, “Intellectual Property”) necessary (i) to carry out its or any of its Affiliates’ obligations under the Master Operative Documents and (ii) for the conduct of the business of Flash Alliance following the Closing as contemplated in the Master Operative Documents, without any conflict with or infringement of the rights of others, except as will not have a material adverse effect on either (i) or (ii) above. Except with respect to items referenced in Schedule 4.7, it has not received any communications alleging that its Intellectual Property violates, or by its or any of its Affiliates entering into the transactions contemplated by the Master Operative Documents, would violate the Intellectual Property of any other Person or entity, which violation could reasonably be expected to have a material adverse effect on either (i) or (ii) above.

Compliance with Laws. It and each of its Affiliates has complied and is complying in all material respects with all laws, statutes, permit requirements, licensing requirements, rules and regulations and judicial or administrative decisions, except where the failure to so comply would not have a material adverse effect on its or any of its Affiliates ability to perform its or their obligations hereunder or under any other Master Operative Document or on the conduct of the business of Flash Alliance following the Closing as contemplated by the Master Operative Documents.

Patent Cross Licenses. Except as set forth on Schedule 4.9, with respect to (a) Toshiba, there are no patent cross licenses between it and any third party that would require Flash Alliance to make any payment pursuant to Section 10 of the Cross License Agreement, and (b) SanDisk, there are no patent cross licenses between it and any third party that would require Flash Alliance to make any payment pursuant to Section 8 of the Cross License Agreement.

COVENANTS

Covenants of the Parties. Each Party agrees that, during the term of this Agreement:

Performance of Obligations. It and each of its Affiliates shall fully and faithfully carry out (i) all its obligations under each Master Operative Document to which it or any Affiliate is a party, and (ii) once agreed, each applicable Business Plan (as defined in the FA Operating Agreement).

Ownership Interest. Except as otherwise expressly permitted by the FA Operating Agreement and this Agreement, it shall not Transfer or permit any of its Affiliates to Transfer all or any portion of its FA Shares (or all or any portion of its interest in any Affiliate through which it beneficially owns its FA Shares), to any Person without the consent of the other Party.

Public Announcements.

At or following the Closing, neither Party shall, nor shall it permit any of its Affiliates to, without the prior written consent of the other Party:

issue any public release, announcement or other document, or otherwise publicly disclose any information or make any public statement, concerning the operations of Flash Alliance or that refers to the other Party or any of its Affiliates in connection therewith (other than a general reference to affiliation with Flash Alliance) that (A) concerns the financial condition or results of operations of Flash Alliance other than as required by any Governmental Rule, Japanese GAAP, Japanese GAAS, US GAAP or US GAAS, with respect to the financial disclosure obligations of either Party or (B) disparages either Party, or Flash Alliance’s performance or reflects negatively on either Party’s commitment to either of Flash Alliance; or

other than as may be required in connection with filings required to be made with Governmental Authorities with respect to the transactions contemplated by the FA Operative Documents pursuant to the Japanese Foreign Exchange and Foreign Trade Law and related regulations, (A) publicly file all or any part of any Master Operative Document or any description thereof or (B) issue or otherwise make publicly available any press release, announcement or other document that contains Confidential Information belonging to the other Party (or its Affiliates) or Flash Alliance, except as may be required by any applicable Governmental Rule, in which case such Party shall (or shall cause the Person required to make such filing to) cooperate with the other Party, to the extent reasonable and practicable, in obtaining any confidential treatment for such filing requested by the other Party.

Each Party shall use commercially reasonable efforts to grant or deny any approval required under this Section 5.2 within five (5) days of receipt of written request by the other Party; provided, however, a Party’s failure to respond within said time period shall not be deemed to constitute such Party’s approval or consent.

Expenses. Each Party shall bear its own expenses in connection with the negotiation, execution and delivery of the Master Operative Documents.

Undertaking as to Affiliate Obligations. Each Party shall cause all covenants, conditions and agreements to be performed, observed or satisfied by each of its Affiliates that is a party to any Master Operative Documents to be fully and faithfully observed, performed and satisfied by such Affiliate, and shall not cause or permit to exist (i) an Event of Default with respect to such Affiliate or (ii) except as otherwise permitted by the FA Operating Agreement, any event of dissolution of Flash Alliance caused by such Affiliate. Nothing in Section 5.1 or in this Section 5.4 shall be construed to create any right in any Person other than the Parties. Without limiting the generality of the foregoing, SanDisk hereby guarantees the obligations of SanDisk Ireland hereunder and under any Master Operative Document to which SanDisk Ireland is a party.

Continuity and Maintenance of Operations. During the term of this Agreement, each Party agrees on behalf of itself and each of its Affiliates that is a party to any Master Operative Document to use all reasonable efforts consistent with past practice and policies to (i) preserve intact in all material respects its and their present business operations, (ii) keep available the services of its and their key employees as a group, and (iii) preserve its relationships with suppliers, licensors, licensees, and others having business relationships with it or them, each to the extent necessary to allow it and such Affiliates to perform its and their obligations under the Master Operative

Certain Deliveries and Notices. Each Party shall promptly inform in writing the other Party of (i) any event or occurrences which could be reasonably expected to have a material adverse effect on its or any of its Affiliates’ ability to perform its or their obligations under any of the Master Operative Documents or the ability of Flash Alliance to conduct its business as contemplated in its most recently approved Business Plan, or (ii) any breach or failure to satisfy any condition or covenant contained herein or in any other Master Operative Document by such Party or any of its Affiliates.

COVENANTS CONCERNING NAND FLASH MEMORY PRODUCTS BUSINESS

New Technology Development.

Immediately after the Effective Date, each Party shall designate three (3) appropriate individuals who will constitute the Common R&D Representatives. The Common R&D Representatives will meet regularly (quarterly) to review, discuss and determine direction of NAND future project plans and SanDisk participation in the Development Work (as defined in the Common R&D Agreement). SanDisk will send, and Toshiba will receive, such number of SanDisk Personnel as are mutually agreed upon, at AMC or other Toshiba facilities during the term of the Common R&D Agreement in order for SanDisk to participate in the Development Work. The Parties have agreed to encourage utilization of tool vendors to perform Development Work where it is effective to do so.

Provided Toshiba continues to develop and advance NAND Flash Memory technology for the benefit of both parties pursuant to the FVC Japan Operative Documents, the FP Operative Documents, the FA Operative Documents and the other Joint Operative Documents, SanDisk agrees to share Toshiba’s Common R&D expenditures and shall pay to Toshiba its portion of such Common R&D expenditures as detailed in the Common R&D Agreement.

Purchased Tools. All tools for the Y4 Facility shall be purchased by Flash Alliance (or a lessor for Flash Alliance’s benefit as contemplated by Section 6.12(a)) and all such purchases shall be agreed upon by the Parties. Toshiba shall, from the Toshiba Semiconductor Company headquarters and at its own expense, provide Flash Alliance with tool purchase service and support and negotiate with vendors on Flash Alliance’s behalf, and SanDisk shall have the right to participate in such negotiations or other tool purchase activities of Toshiba, at SanDisk’s own expense. For such purpose, a joint SanDisk/Toshiba tool procurement team (“Joint Tool Procurement Team”) will be formed and each member of the team will have total participation, visibility and responsibility in tool selection and procurement negotiations, including tool evaluation activities of the Joint Procurement Team. Toshiba Semiconductor Company will provide to Flash Alliance the full benefit of its volume purchase agreements in order to maximize efficiency and minimize costs. Immediately after the effective date of this Agreement, the Parties will establish a process that enables equal participation and equal decision making by the Parties in tool evaluation and purchase (depending on SanDisk’s ability to participate).

Technology Transfers.

Toshiba will make available to Flash Alliance its 70 nanometer [***] process technology applicable to the manufacturing and testing of NAND Flash Memory Products (“NAND Process

Whenever a technology transfer is required hereunder, Toshiba shall deliver such level of NAND Process Technology to the Y4 Facility as would be normal practice by the Toshiba Semiconductor Company whenever it transfers a technology to a new manufacturing facility or transfers a new or advanced technology to an existing manufacturing facility in order to achieve successful implementation of the newly transferred technology.

A technology transfer hereunder shall be deemed complete when the transferred technology passes a reasonable qualification procedure to be mutually agreed upon by the Parties.

[***]

[***]

Start-Up Services for Y4. The Parties acknowledge that either or both of the Parties and Flash Alliance have incurred or will incur costs in connection with developing Flash Alliance and the Y4 Facility and preparing the Y4 Facility for production, including personnel costs, materials costs and other operating expenses, that are properly allocable to Flash Alliance and for which each Party has the obligation ultimately to bear 50% of the responsibility (“Start-Up Costs”). The Parties shall discuss in good faith and agree upon the Start-Up Costs, the allocation to Flash Alliance of Start-Up Costs borne by either Party and the means and timing of each Party, as applicable, being reimbursed or credited for having incurred more than 50% of the Start-Up Costs or of making payments due to having incurred less than 50% of the Start-Up Costs.

Y4 Facility Ramp-Up Plan.

Equal Participation and Purchase Price Per Unit. The Parties intend to meet demand for increased capacity by equally investing in, and jointly building, and sharing, on equal or substantially equal terms, equal amounts of new capacity for Y4 NAND Flash Memory Products, except as they may otherwise agree as contemplated herein. Where the Parties purchase the same output volume of equivalent Y4 NAND Flash Memory Products, the Parties will pay the same purchase price per unit.

Ramp-Up Plan. The Parties acknowledge that they intend to expand their Y4 NAND Flash Memory Product manufacturing capacity through development of the Y4 Facility according to volumes and timing set forth in Schedule 6.5(b) (including to [***] L/M, the “Ramp-Up Plan”). The Parties will discuss in good faith whether the production capacity of Y4 should be expanded by the Parties toward the Y4 Facility’s targeted capacity of approximately [***] L/M.

Ramp-Up Plan Commitments and Changes. The Parties agree as follows concerning the Ramp-Up Plan:

The initial 1,000 L/M in aggregate increases in production capacity of the Y4 Facility identified on the Ramp-Up Plan shall be considered firmly committed by each Party (i.e., 500 L/M each) as of the times specified in the Ramp-Up Plan and in accordance with this Section 6.5(c)(i) (the “Minimum RUP Commitment”). The Parties shall agree upon one or more Business Plans that provide for implementing the [***].

[***]

[***]

[***]

[***]

[***]

[***]

[***]

Capacity.

Priority.

SanDisk’s manufacturing capacity for, and purchased supply of, NAND Flash Memory Products shall be sourced by SanDisk and its Subsidiaries from, and in, the following priority:

from Flash Partners, to fulfill the capacity allocated to SanDisk, as provided for under the FP Operative Documents,

from Flash Alliance, to fulfill the capacity allocated to SanDisk, as provided for under the FA Operative Documents,

[***]

[***]

from [***] and/or from other third parties (so long as [***], and SanDisk shall have fulfilled its 50% share of the Ramp-Up Plan for the Y3 Facility (the “Y3 Ramp-Up Plan”) and its 50% share of the increment of the Ramp-Up Plan set forth in the then-current Business Plan approved by the Parties for the Y4 Facility.) [***]

[***]

[***]

[***]

[***]

[***]

[***]

In no event will [***] SanDisk [***] source NAND Flash Memory Products from a source other than Flash Partners if the effect of such sourcing is the diversion of resources or other (intended or collateral) effects which reduce the economic or other efficiency of the Y3 Facility (including not fully executing the Y3 Ramp-Up Plan).

[***]

Technology Transfer. If the Parties mutually agree to secure external manufacturing sources other than the Yokkaichi Facility through joint investment, Flash Alliance and Toshiba, as applicable, will jointly transfer the applicable manufacturing technology and know-how to such source. Flash Alliance and Flash Partners (with respect to 300 millimeter wafers) and FVC Japan (with respect

Capacity Sharing Arrangement.

Equal right to capacity. Subject to Section 6.5(c), each of the Parties will have the right and obligation, through Flash Alliance, to utilize 50% of the wafers produced at the Y4 Facility based on a measure of equivalent lots out per week with the equivalency being weighed based on the process complexity factors (as calculated by a formula to be mutually determined by the Parties) of the Y4 NAND Flash Memory Products.

Alternative use of allotted capacity.

If a Party is unable to utilize its allotted manufacturing capacity for Y4 NAND Flash Memory Products (such Party, an “Excess Capacity” or “EC Party”), it may do any of the following:

An EC Party may request the other Party to negotiate the terms of transfer of its capacity shortfall to the other Party, which may choose whether to accept such additional capacity and on what terms in its sole discretion.

An EC Party may use its capacity for Embedded NAND Products, as defined in and subject to Section 6.7(c).

An EC Party may use its capacity for Proprietary NAND Flash Memory Products and non-Proprietary NAND Flash Memory Products, in accordance with and subject to Sections 6.7(d) and (e).

If both Parties are EC Parties because demand for both Parties’ Y4 NAND Flash Memory Products are significantly below expectations, the Parties will discuss in good faith whether to permit products which are not Y4 NAND Flash Memory Products to be produced at the Y4 Facility; provided that (A) the inability of the Parties so to agree shall not constitute a Deadlock (as defined in the FA Operating Agreement) and (B) the foregoing shall not limit either Party’s rights in the remainder of this Section 6.7.

Either Party shall have the right use a portion of its total allocated capacity with respect to the Y4 Facility to run a memory product which is not a Y4 NAND Flash Memory Product (solely because the NAND flash memory array area is equal to or less than [***] of the total die area (“Embedded NAND Product”)) so long as such Embedded NAND Product [***]. If a Party exercises its option to run Embedded NAND Products, it must [***]. The conditions stated in Sections 6.7(d) and (e) do not apply to Embedded NAND Products.

Each Party may use a portion of its total allocated capacity to cause to be manufactured NAND Flash Memory Products which are proprietary to that Party (“Proprietary NAND Flash Memory Products”) and which need not be shared with the other Party. Proprietary NAND Flash Memory Products may be produced at the Y4 Facility so long as such products [***]. If a Party exercises such option, it must [***]. No such Proprietary NAND Flash Memory Products may be run if doing so [***]. Each Party shall give the other Party at least ninety (90) days’ advance written notice of its intention to use a portion of its allocated capacity to manufacture Proprietary NAND Flash Memory Products and the Parties shall refer the matter to the Board of Directors for consultation and planning, with the intention to minimize the impact of such allocation. Such notifying Party will limit the output volume of such Proprietary NAND Flash Memory Products to [***] of such Party’s total allocated output at the Y4 Facility unless it receives the consent of the other Party to an increase in such output volume above such limit.

Each Party (the “Originating Party”) shall inform the other (the “Non-Originating Party”) of the development plans by the Originating Party to develop NAND Flash Memory Products, and the Originating Party and the Non-Originating Party shall each refer such matter to the Coordinating Committee (as defined in the Product Development Agreement). If the Coordinating Committee unanimously decides that such planned development shall be undertaken jointly, then the cost of such joint development shall be borne by each Party in accordance with the Product Development Agreement, and the NAND Flash Memory Products manufactured following such joint development shall be considered non-Proprietary NAND Flash Memory Products for purposes of Section 6.7(d); provided, however, the NAND Flash Memory Products set forth in Exhibit A to the Product Development Agreement shall be deemed to be non-Proprietary NAND Flash Memory Products without any action by the Coordinating Committee. Subject to the foregoing, if the Coordinating Committee does not unanimously decide that such planned development shall be undertaken jointly, then the Originating Party may, at its sole discretion, either (i) transfer to the Non-Originating Party the technology, including the items in Exhibit C to the Product Development Agreement relating to such technology, used to manufacture such NAND Flash Memory Products on a royalty-free basis, whereupon such NAND Flash Memory Products shall be considered non-Proprietary NAND Flash Memory Products, or (ii) treat such NAND Flash Memory Products as Proprietary NAND Flash Memory Products for purposes of Section 6.7(d). In the event the Originating Party elects to treat any NAND Flash Memory Products as Proprietary NAND Flash Memory Products in accordance with the preceding sentence, but thereafter the Coordinating Committee unanimously determines that such Proprietary NAND Flash Memory Products should be developed jointly, the Originating Party shall transfer to the other Party the technology used to manufacture such NAND Flash Memory Products on reasonable terms and conditions to be mutually agreed upon by the Parties, whereupon such Proprietary NAND Flash Memory Products shall be treated as non-Proprietary NAND Flash Memory Products.

Engineering Wafers and Development Expense. Each Party will have full access to all operational and engineering data and reports related to engineering wafers manufactured at Y4.

Engineering wafers and development expenses are further and more completely defined in four categories: Common R&D Development Expenses, Y4 Direct R&D Development Products, Evaluation Wafers, Qualification Wafers (each as defined below).

“Common R&D Development Expenses” means [***]. The Parties agree to set up pilot-line(s) [***]. The Parties confirm their intent that [***]. Notwithstanding the foregoing, the Parties shall meet from time to time [***]. The Parties shall meet at the end of each quarter to determine if any engineering activities performed during the quarter [***], whether agreed in advance or not, [***]. If any activities performed [***] are agreed by the parties to [***].

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“Evaluation Wafers” are those wafers manufactured [***]. Both parties are entitled to receive evaluation wafers [***]. The cost of Evaluation Wafers is [***].

“Qualification Wafers” are those wafers [***]. The Parties will discuss and agree on the appropriate quantity of Qualification Wafers required for each Y4 NAND Flash Memory Product. [***].

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Creation of Management Committee. The management committee established by the Parties pursuant to the FVC Japan Master Agreement and the FP Master Agreement to facilitate management of the respective operations of FVC Japan and Flash Partners (the “Management Committee”) shall do the same for Flash Alliance, as detailed in this Section 6.9.

Authority. The Management Committee shall have the authority to (i) advise Flash Alliance with respect to policy and operating matters common to Toshiba and SanDisk as well as on such other matters as Flash Alliance may refer to the Management Committee from time to time, (ii) hear and seek to resolve any disputes regarding operational matters or alleged breaches of any Master Operative Documents (including dispute resolution), and (iii) take the actions specified to be taken by the Management Committee in this Agreement or any Master Operative Document, including in this Section 6.9 and in Section 6.3.

The Management Committee shall consist of six members (the “Committee Representatives”), three of whom shall be appointed by Toshiba, and three of whom shall be appointed by SanDisk (for such purpose, each of the Parties is referred to in this Section 6.9 as an “Appointing Party”). Each Appointing Party shall be entitled to appoint an alternate Committee Representative to serve in the place of any Committee Representative appointed by such Appointing Party should any such Committee Representative be unable to attend a meeting. Each Party shall be entitled to invite a reasonable numbers of observers to all Management Committee meetings.

Each Committee Representative or alternate Committee Representative shall serve at the pleasure of the designating Appointing Party and may be removed as such, with or without cause, and his successor designated, by the designating Appointing Party. Each Appointing Party shall have the right to designate a replacement Committee Representative in the event of any vacancy among such Appointing Party’s appointees.

Each Appointing Party shall bear any cost and expense incurred by any Committee Representative or alternate Committee Representative designated by such Appointing Party to serve on the Management Committee, and no Committee Representative or alternate Committee Representative shall be entitled to compensation from Flash Alliance for serving in such capacity.

Each Appointing Party shall notify the other Appointing Party and Flash Alliance in writing of the name, business address and business telephone and facsimile numbers of each Committee Representative and each alternate Committee Representative that such Appointing Party has been appointed to the Management Committee. Each Appointing Party shall promptly notify the other Appointing Party and Flash Alliance of any change in such Appointing Party’s appointments or of any change in any such address or number.

For purposes of any approval or action taken by the Management Committee, each Committee Representative shall have one vote. All of the votes eligible to be cast at any meeting must be voted in favor of any action to be taken by the Management Committee at such meeting.

At any meeting of the Management Committee, a Committee Representative, in the absence of one or more other Committee Representatives appointed by the same Appointing Party or an alternate Committee Representative, may cast the vote such absent Committee Representatives would otherwise be entitled to cast.

The quorum necessary for any meeting of the Management Committee shall be those Committee Representatives entitled to cast all of the votes held by the members of the Management Committee. A quorum shall be deemed not to be present at any meeting for which notice was not properly given under Section 6.9(c), unless the Committee Representative or Committee Representatives as to whom such notice was not properly given attend(s) such meeting without protesting the lack of notice or duly execute(s) and deliver(s) a written waiver of notice or a written consent to the holding of such meeting.

Each appointment by an Appointing Party to the Management Committee shall remain in effect until the Appointing Party making such appointment notifies the other Appointing Party and Flash Alliance in writing of a change in such appointment. The resignation or removal of a Committee Representative shall not invalidate any act of such Committee Representative taken before the giving of such written notice of the removal or resignation of such Committee Representative (or alternate Committee Representative).

Meetings, Notice, etc.

Meetings of the Management Committee shall be held at such location or locations as may be selected by the Management Committee from time to time.

Regular meetings of the Management Committee shall be held on such dates and at such times as shall be determined by the Management Committee and shall be held as required or as requested by the Board of Directors.

Notice of any regular meeting or special meeting pursuant to Section 6.9(c)(iv) shall be given to each Committee Representative at least ten (10) Business Days prior to such meeting in the case of a meeting in person or at least five (5) Business Days prior to such

Special meetings of the Management Committee may be called by any Committee Representative by notice given in accordance with the notice requirements set forth in this Section 6.9, which notice shall state in reasonable detail the purpose or purposes for which such meeting is being called; provided, that, the Committee Representatives appointed by the Appointing Party that is not represented by the Committee Representative calling such special meeting shall be entitled to in good faith select a convenient location for the meeting and to suggest an alternative time or times if the designated time is not convenient for them. Except as set forth in Section 6.9(c)(vi), no action may be taken and no business may be transacted at such special meeting which is not identified in such notice unless (A) such action or business is incidental to the action or business for which the special meeting is called or (B) such action or business does not materially adversely affect the Parties, any of their respective Affiliates which are parties to any of the Master Operative Documents or Flash Alliance. Minutes of each Management Committee meeting shall be sent by facsimile to all Committee Representatives within ten (10) Business Days after such meeting. Material to be presented at any Management Committee meeting shall be sent by facsimile, electronic mail or delivered in hard copy to all Committee Representatives together with the notice described in Section 6.9(c)(vi).

The actions taken by the Management Committee at any meeting, however called and noticed, shall be as valid as though taken at a meeting duly held after regular call and notice if (but not until), either before, at or after the meeting, any Committee Representative as to whom such meeting was improperly held duly executes and delivers a written waiver of notice or a written consent to the holding of such meeting; provided, however, any Committee Representative who is present at a meeting and does not protest the failure of notice shall be deemed to have received adequate notice thereof. A vote of the Management Committee may be taken only either in a meeting of the members thereof duly called and held or by the execution by the Committee Representatives eligible to cast all the votes on the Management Committee without a meeting of a consent setting forth the action so taken, and identified as a consent of the Committee Representatives pursuant to this Section 6.9.

Upon the consent of all Committee Representatives, a meeting of the Management Committee may be held by conference telephone or similar communications equipment by means of which all Committee Representatives participating in the meeting can hear and be heard by all other participants, provided, that, such communications equipment continues to be operational throughout the meeting. Any Committee Representative may elect to participate in a meeting by conference telephone or similar communications equipment upon sufficient advance notice to permit arrangements therefor to be made. At any meeting, the Management Committee shall consider (A) any items added to the Management Committee agenda for discussion by the Parties and (B) such other matters as the Management Committee decides to review.

The Management Committee shall, from time to time, elect one of its members to preside at its meetings, which presiding member shall alternate annually if requested by either Party. The Management Committee may establish reasonable rules and regulations to (A) require officers to call meetings and perform other administrative duties, (B) limit the number and participation of observers, if any, and require them to observe confidentiality obligations and (C) otherwise provide for the keeping and distribution of minutes and other internal Management Committee governance matters not inconsistent with the terms of this Agreement.

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All members of the SanDisk Team will remain employees of SanDisk. Each Party will indemnify the other Party and Flash Alliance from any claim by any of such Party’s employees, consultants or agents (such Party being the “Employer”) (A) based on other than willful misconduct of such Employer, its employees, consultants or agents; or (B) that he or she has rights, or is owed obligations, as an employee of the Party that is not the Employer.

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Non-solicitation of Employees. So long as the business of Flash Alliance continues, each Party (and each of its respective Affiliates) shall not, without the prior written consent of the other Party, directly recruit or solicit any employee or director of Flash Alliance to leave his or her employment with Flash Alliance prior to the period ending twenty-four (24) months after the FA Termination Date; provided, however, that placement of employment advertisements or other general solicitation for employees not specifically targeted to the employees or directors of Flash Alliance shall not constitute direct recruitment. In the event of the dissolution and liquidation of Flash Alliance, either Party (or any Affiliate of either Party) may solicit any former employee of such dissolved and liquidated company, but neither Party (nor any of its Affiliates) shall be required to employ any such Person. If all of the FA Shares held by one Party are purchased by

Financing.

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The Parties currently intend, but are not obligated, to structure the financing for equipment purchases by Flash Alliance necessary to implement the Ramp-Up Plan as follows:

Flash Alliance will enter into equipment lease or loan agreements and pledge the financed equipment as collateral;

Flash Alliance will secure external financing for approximately 50% of the initial purchase price of its tools and each Party will provide equity capital contributions and loans (on a subordinated basis) for the remaining cash requirements of Flash Alliance necessary to execute the Ramp-Up Plan;

each Party will severally and not jointly and through separate arrangements guarantee as close as possible to 50% of Flash Alliance’s obligations under such lease or loan agreements (any financing separately guaranteed or provided by Toshiba for Flash Alliance or otherwise for investment in the Y4 Facility, “Toshiba Financing”, any such financing separately guaranteed or provided by SanDisk for Flash Alliance or otherwise for investment in the Y4 Facility “SanDisk Financing” and the Toshiba Financing and SanDisk Financing, each a “Financing”); and

the Parties will attempt to obtain the foregoing financing from the same financial institution, but under separate agreements that expressly disclaim any joint and several liability of the Parties.

With respect to any Toshiba Financing or SanDisk Financing, the following shall apply:

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Unless otherwise expressly agreed by both Parties in writing in each case, all Toshiba Financing and all SanDisk Financing shall create only several obligations of the Parties and no joint and several obligations or liability. Toshiba (with respect to Toshiba Financing) and SanDisk (with respect to SanDisk Financing) hereby indemnifies and holds harmless the other Party and its Indemnified Parties from any claims by any financial institution or other Person that the other Party has any liabilities or obligations with respect to, respectively, any Toshiba Financing or SanDisk Financing (unless joint liability has been agreed pursuant to the first sentence of this Section 6.12(c)(ii)).

Flash Alliance will use commercially reasonable efforts to comply with the requirements of any financing sources. Flash Alliance will make available to each Party one-half of its assets (with as near as practicable cost, collateral value and type) to secure such Party’s Financing (whether external or loans from a Party or its Affiliates).

If the lender under the Financing for either Party (as the “Defaulting Party”) takes significant actions to enforce its right in the collateral, then the other Party (as the “Non-Defaulting Party”) shall have the right, but not the obligation, to cure the default giving rise to the lender’s enforcement action. If the Non-Defaulting Party exercises such cure right, then the Non-Defaulting Party’s rights in any subject collateral shall be superior to the Defaulting Party’s and the Non-Defaulting Party may exercise one of the following options:

the Non-Defaulting Party (A) shall have a claim against the Defaulting Party for reimbursement of any payments made by the Non-Defaulting Party on the Defaulting Party’s behalf (which will be subordinate to the lender’s claims and bear interest at a rate 500 basis points in excess of the rate being charged by the lender to the Defaulting Party) and (B) shall have the right, until and unless the Defaulting Party pays in full the obligation to the Non-Defaulting Party under foregoing clause (A), to take over the increment of production of the Y4 Facility represented by the collateral with respect to which the lender took significant actions to enforce its rights; or

the Non-Defaulting Party shall have the right to terminate the Operating Agreement pursuant to Section 11.6 thereof (Foreclosure Default).

Other Activities. Except as expressed in Section 6 and in the Common R&D Agreement, neither Party nor any of their respective Affiliates shall: (i) fabricate NAND Flash Memory Integrated Circuits at any location other than the Yokkaichi Facility or any other fabrication facility agreed upon by the Parties in writing; (ii) have any third party fabricate NAND Flash Memory Integrated Circuits; or (iii) have any right to fabricate NAND Flash Memory Integrated Circuits beyond the capacity as limited pursuant to this Section 6, as such capacity limitations may be amended from time to time in accordance with this Section 6. For the avoidance of doubt, nothing contained in the foregoing shall restrict the Parties from engaging in any other activities, including, without limitation, (A) designing any NAND Flash Memory Product; (B) selling any NAND Flash Memory Product to any customer; (C) entering into any equipment purchase or material supply agreements; or (D) entering into any patent licensing arrangement; and nothing in the foregoing shall restrict Toshiba from installing any manufacturing line in the Toshiba Foundry Facility subject to the capacity limitations set forth in Section 6 of the FVC Japan Master Agreement and the FP Master Agreement and as provided herein, as such capacity limitations may be amended from time to time in accordance with this Section 6. For purposes of this Section 6.13, “NAND Flash Memory Integrated Circuits” means ICs included in the definition of NAND Flash Memory Products pursuant to Section 3.2.

Protection of Intellectual Property. Both Parties recognize that it is important for the success of the Y4 NAND Flash Memory Products business to promote the adoption of such Y4 NAND Flash Memory Products with a wide variety of customers and applications, whether for card use or non-card use, and with such recognition, each Party shall use reasonable efforts to protect and enhance the value of Y4 NAND Flash Memory Products. Further, where feasible, each Party shall share with Flash Alliance internally prepared analyses of competitive products prepared by either Party so as to allow Flash Alliance to respond to such information and remain competitive in the marketplace; provided, that neither Party warrants as to the accuracy or completeness of any such analysis so provided.

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OTHER AGREEMENTS

Flash Alliance Management.

As contemplated by the FA Operating Agreement, the Y4 Operating Committee’s purpose is to give both Parties the ability to influence the day to day operating decisions of Flash Alliance and the Y4 Facility. The Y4 Operating Committee is intended to be a collaborative body with real-time communications, respectful consultation and dispute resolution with the goal of making the Y4 Facility the most competitive (cost and technology) memory fabrication facility in the world.

If the Y4 Operating Committee is unable to decide an issue (by agreement of its two members) such issue shall be referred to the Board of Directors. Special meetings of the Board of Directors may be noticed for issues requiring urgent resolution. The Parties contemplate that while a special meeting of the Board of Directors is being noticed, their respective management teams will discuss any issue that the Y4 Operating Committee could not resolve.

If the Board of Directors is unable to decide an issue (by unanimous agreement), such issue shall be referred to the Management Committee for resolution, which shall be vested with final decision making authority. This Agreement separately provides for procedures if the Management Committee is unable to reach agreement on such issue.

Y4 Facility.

Building Construction and Facilitization. Toshiba has designed and is constructing and facilitizing the Y4 Facility at its sole cost and expense, and SanDisk shall work with Toshiba to help minimize administrative approval delays. Toshiba will exercise all reasonable efforts to ensure that the construction of the Y4 Facility is completed by [***], provided that Toshiba shall have no liability to SanDisk, any SanDisk Affiliate or Flash Alliance if completion is not achieved by such time. The depreciation charges for Y4 will be passed on to Flash Alliance as further described in Section 7.3(d).

With prior coordination with Toshiba and the construction contractors for the Y4 Facility, SanDisk will have reasonable access to the construction site for the Y4 Facility and to all information pertaining to the construction of the Y4 Facility, on condition that SanDisk will be solely responsible for all damage caused by such access.

Land. Neither SanDisk nor Flash Alliance will be charged for the land Toshiba currently owns and makes available for the Y4 Facility. With respect to new land (purchased or leased by Toshiba) required or related to the establishment of the Y4 Facility and its operations, SanDisk will pay Toshiba on a quarterly basis during the term of this Agreement a fair, reasonable and mutually-agreed fee to be calculated based on the amount Toshiba actually pays or incurs for such new land and the number of parking spaces; provided, however, that Toshiba will determine whether there will be a multi-level parking structure, single level parking lot, or other method of providing parking for the Yokkaichi Facility, and, provided further, that during the term of this Agreement SanDisk’s payments in respect of land and parking costs will in no event exceed [***] per year.

Incentives. All government incentives (financial or otherwise) received with respect to Flash Alliance, the Y4 Facility or Y4 operations will be shared equally by the Parties.

FP Foundry Agreement. Flash Alliance and Toshiba shall enter into the FA Foundry Agreement at the Closing. The FA Foundry Agreement provides for ordering procedures, prices, delivery, cost reporting and other specific terms and conditions for the manufacture by Toshiba and supply to Flash Alliance of Y4 NAND Flash Memory Products, which shall be consistent with the following basic terms:

Facilities, Equipment and Raw Materials. The manufacturing facilities will be located [***] or such other place as the Parties may agree upon. Flash Alliance and Toshiba will enter into an exclusive lease agreement with respect to the Y4 Facility and Flash Alliance’s manufacturing equipment located in the Y4 Facility to be used in the manufacture of Y4 NAND Flash Memory Products by Toshiba. Toshiba shall be responsible for obtaining the raw materials and services to be used in the manufacture of Y4 NAND Flash Memory Products.

Production. Toshiba will manufacture Y4 NAND Flash Memory Products at the Y4 Facility for Flash Alliance ordered by Toshiba and SanDisk under the terms and conditions of the FA Purchase and Supply Agreements. Flash Alliance and Toshiba (from the Yokkaichi Facility) will use their best efforts to achieve the Ramp-Up Plan manufacturing capacity (the “Y4 Facility Target Capacity”). Wafers will be sorted between the Parties such that aggregate yield losses will be shared on an equal basis.

Operating Relationship. The Parties shall provide personnel necessary for the manufacturing of the Y4 NAND Flash Memory Products as described in Section 6.10.

Consideration to be Paid to Toshiba. Toshiba will be compensated by Flash Alliance as provided in Section 4 of the FA Foundry Agreement, [***]

No Duplication of Costs or Expenses. It is the intent of the Parties that any payments made by SanDisk under or pursuant to any Master Operative Documents, FVC Japan Operative Documents or FP Operative Documents shall not be duplicative and SanDisk shall in no event be required to pay or contribute more than once for any service, product or development work provided under such agreements, if such service, product or development work is provided under more than one agreement. In addition, if SanDisk makes a direct payment for any service, product or development work provided under any such agreement, the cost incurred by Toshiba (from the Yokkaichi Facility), FVC Japan, Flash Partners or Flash Alliance, as the case may be, in connection with the provision of such service, product or development work shall not be included in the applicable wafer price charged to SanDisk.

Exclusivity. The Yokkaichi Facility shall be Flash Alliance’s exclusive manufacturing source for output of Y4 NAND Flash Memory Products. Flash Alliance may seek external manufacturing sources for output in excess of the Yokkaichi Facility’s capacity upon unanimous approval by the Management Committee.

FA Purchase and Supply Agreements. Flash Alliance and each of the Parties or their respective Affiliates will enter into substantially identical FA Purchase and Supply Agreements providing for specific terms and conditions for the purchase by the Parties of Y4 NAND Flash Memory Products from Flash Alliance, which shall be consistent with the following basic terms:

Manufacturing. Flash Alliance shall manufacture or cause to be manufactured Y4 NAND Flash Memory Products as contemplated by Section 7.3.

Purchase Commitment. Except as contemplated in Section 6.5(c)(ii), each Party shall (itself or through Affiliates) purchase one half (based on a measure of equivalent lots out per week with the

Sales Price for Y4 NAND Flash Memory Products Purchased by the Parties. The sales price charged by Flash Alliance to the Parties for wafers manufactured at Y4 shall be the sum of:

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Other Cost Items. Other items related to the manufacture of Y4 NAND Flash Memory Products will be charged on a monthly basis from Flash Alliance to the Parties and will include the following:

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Other Matters.

Forecasts/Production Planning. Each Party will submit forecasts, on a rolling six-month basis, directly to Flash Alliance, as further provided in the Purchase and Supply Agreements. The Parties shall use the system at the Y3 Facility for such direct system, provided that the cost necessary for [***] will be borne by SanDisk. Flash Alliance production planning will hold a monthly production planning meeting with representatives of each Party, as further provided in the Purchase and Supply Agreements. At such meetings, the Parties will agree on a production plan for the [***] which plan will be final (and the related forecast will be deemed to be covered by a binding purchase order).

Production Control. Flash Alliance will provide [***] on a non-discriminatory basis to SanDisk [***] with respect to [***], provided that the cost necessary for making such system available or [***] will be borne by SanDisk. Each Party (through the Y4 Management Committee) will have the right to discuss the production schedule, planned wafer starts and [***].

Operating Reports. SanDisk will have full access to any management or operation reports related to Flash Alliance or Flash Alliance’s business through the Y4 Operating Committee (as defined in the FA Operating Agreement). Management and operating reports related to Flash Alliance or Flash Alliance’s business as mutually agreed from time to time will be simultaneously made available in Japanese and English to each Party. Upon request, Toshiba employees will explain such reports to SanDisk’s employees and respond to questions from SanDisk’s employees, but Toshiba will not be responsible for SanDisk’s failure to understand such reports.

Insurance. Toshiba shall maintain or arrange property insurance covering assets owned or leased by Flash Alliance and business interruption insurance in respect of the business of Flash Alliance, the scope and amounts of which shall be consistent with Toshiba’s practices at the Yokkaichi Facility and as required by any lender. This coverage shall provide basically full replacement value of all Flash Alliance owned and leased equipment, subject to valuation as part of Toshiba’s annual insurance policy renewal, and shall name Flash Alliance as a beneficiary in respect of assets owned or leased by it and Flash Alliance’s employee expenses covered by business interruption insurance. On an annual basis, or when requested by either Party, the Y4 Operating Committee shall discuss and review the current insurance coverage and/or the need for any additional property or business interruption insurance in respect of Flash Alliance’s assets or business. Further, SanDisk reserves the right to seek to arrange additional property or business interruption insurance for its own account in respect of Flash Alliance’s assets or business. If SanDisk seeks such additional property or business interruption insurance, Toshiba shall cooperate in good faith to provide such information and access as is reasonably necessary for SanDisk to arrange such insurance. If Toshiba makes a recovery from a third party (other than an insurer per the above) in respect of both assets of Flash Alliance and other assets, then Toshiba shall allocate to Flash Alliance a share of the net amount of such recovery in proportion to the losses suffered by Flash Alliance and total losses suffered by Flash Alliance and Toshiba.

TERMINATION

Termination.

Termination of any Master Operative Document by either Party shall be done only in good faith.

This Agreement shall be terminated automatically upon the earlier of the Transfer of all of a Party’s FA Shares to the other Party (or its Affiliate) or upon completion of the dissolution and liquidation of Flash Alliance pursuant to Section 11 (Dissolution) of the FA Operating Agreement (the date of such Transfer or dissolution and liquidation, the “FA Termination Date”).

Upon termination of this Agreement resulting from an event of dissolution of Flash Alliance due to the expiration of Flash Alliance pursuant to Section 11.1(a) (Expiration) of the FA Operating Agreement:

the Parties shall further amend the Cross License Agreement, as then in effect, to specify that each Party’s patents issued or issuing on patent applications entitled to an effective filing date prior to the FA Termination Date are licensed on a royalty-free basis for the duration of such patents. The scope of the licenses as amended pursuant to this Section 8.1(c)(i) shall not be greater than the scope of those granted under the Cross License Agreement, as in effect as of the FA Termination Date.

Toshiba shall grant to SanDisk, effective upon the FA Termination Date, a non-exclusive, non-transferable (except to Affiliates of SanDisk), non-sub-licensable, fully paid up, royalty-free license to make, have made, use, sell and have sold NAND Flash Memory Products anywhere in the world utilizing the NAND technology transferred to and/or utilized at the Yokkaichi Facility, and SanDisk shall have full access to all such know-how at the Yokkaichi Facility which has been transferred to the Yokkaichi Facility prior to the FA Termination Date.

Upon a termination of this Agreement resulting from (i) an event of dissolution of Flash Alliance or (ii) one Party’s acquisition of all of the other Party’s FA Shares (the acquirer thereof referred to

Toshiba or the Acquiring Party, as the case may be, will, upon the request, prior to the FA Termination Date, of (A) SanDisk (such request to be made at the time of its notice pursuant to Section 11.5 of the FA Operating Agreement) in the case of the dissolution of Flash Alliance or (B) the Selling Party (each, a “Requesting Party”), as the case may be, continue to manufacture NAND Flash Memory Products for the Requesting Party (not to exceed the Requesting Party’s capacity allocation available from Flash Alliance under this Agreement as of the FA Termination Date (the “Termination Capacity”)) for a period of eighteen (18) months following the Termination Date in the following ramp-down manner:

During the first six months following the FA Termination Date: 100% of the Termination Capacity

During the 7th through the 12th month following the FA Termination Date: 75% of the Termination Capacity

During the 13th through the 18th month following the FA Termination Date: 50% of the Termination Capacity.

Toshiba and SanDisk and their respective Affiliates shall have a perpetual, fully paid-up, royalty-free right to use technology previously transferred to one another during the term of this Agreement.

The Parties shall further amend the Cross License Agreement to specify that each Party’s patents issued or issuing on patent applications entitled to an effective filing date prior to the FA Termination Date are licensed on a royalty free basis for the duration of such patents. The scope of the licenses as amended pursuant to this Section 8.1(d)(iii) shall not be greater than the scope of those granted under the Cross License Agreement, as in effect as of FA Termination Date.

Upon termination of this Agreement resulting from an event of dissolution of Flash Alliance caused by Toshiba’s election to withdraw from Flash Alliance pursuant to the FA Operating Agreement, Toshiba hereby grants to SanDisk, effective upon the FA Termination Date, a non-exclusive, non-transferable (except to Affiliates of SanDisk), non-sub-licensable, fully paid-up, royalty-free license to make, have made, use, sell and have sold NAND Flash Memory Products anywhere in the world utilizing the NAND technology transferred to and/or utilized at the Yokkaichi Facility, and SanDisk shall have full access to all such know-how at the Yokkaichi Facility which has been transferred to the Yokkaichi Facility prior to the FA Termination Date.

Upon termination of this Agreement resulting from an event of dissolution of Flash Alliance or Toshiba’s acquisition of SanDisk’s FA Shares pursuant to Section 11.4 (Dissolution By Unilateral Option) of the FA Operating Agreement:

From the Yokkaichi Facility, Toshiba will, upon request of SanDisk given within sixty (60) days of the notice given by SanDisk pursuant to Section 11.4 of the FA Operating Agreement, continue to manufacture products for SanDisk for a period of eighteen (18) months following the FA Termination Date in accordance with the following ramp-down manner; provided, however, such capacity allocation for SanDisk shall not exceed its

During the first six months following the FA Termination Date: 100% of the SanDisk Termination Capacity

During the 7th through the 12th month following the FA Termination Date: 75% of the SanDisk Termination Capacity

During the 13th through the 18th month following the FA Termination Date: 50% of the SanDisk Termination Capacity.

The Parties and their respective Affiliates shall have a perpetual, fully paid-up, royalty-free right to use technology previously transferred to one another during the term of this Agreement.

The Parties shall further amend the Cross License Agreement to specify that, with respect only to Y4 NAND Flash Memory Products and any other Licensed Products defined in the Cross License Agreement and manufactured with 300mm wafers at any facility, each Party’s patents issued or issuing on patent applications entitled to an effective filing date prior to the FA Termination Date are licensed at the royalty rates specified in Schedule 8.1(e) until March 31, 2015; provided, that after such five (5) year period, such license shall be on a royalty free basis and provided, further, that at any time during such five year period, both Parties shall negotiate in good faith for up to one hundred and eighty (180) days as requested by either Party to mutually agree on royalty rates for patents filed by each Party after the FA Termination Date. The scope of the licenses as amended pursuant to this Section 8.1(e)(iii) shall not be greater than the scope of those granted under the Cross License Agreement, as in effect as of the FA Termination Date.

Upon termination of this Agreement resulting from an event of dissolution of Flash Alliance or one Party’s acquisition of the other Party’s FA Shares following a Deadlock (as defined in the FA Operating Agreement) pursuant to Section 10.3 (Dispute Resolution; Deadlock) of the FA Operating Agreement:

In the case of one Party’s acquisition of the other Party’s FA Shares pursuant to Section 10.4(e) of the FA Operating Agreement, the Acquiring Party shall continue to manufacture products for the other Party (not to exceed the other Party’s Termination Capacity) for a period of eighteen (18) months following the FA Termination Date in accordance with the following ramp down manner:

During the first six months following the FA Termination Date: 100% of the Termination Capacity

During the 7th through the 12th month following the FA Termination Date: 75% of the Termination Capacity

During the 13th through the 18th month following the FA Termination Date: 50% of the Termination Capacity.

The Parties and their respective Affiliates shall have a perpetual, fully paid-up, royalty-free right to use technology previously transferred to one another during the term of this Agreement.

The Parties shall further amend the Cross License Agreement to specify that, with respect only to Y4 NAND Flash Memory Products and any other Licensed Products defined in the Cross License Agreement and manufactured with 300mm wafers at any facility, each Party’s patents issued or issuing on patent applications entitled to an effective filing date prior to the FA Termination Date are licensed: (x) at the royalty rates specified in Schedule 8.1(f) until March 31, 2014; (y) at the royalty rates specified in Schedule 8.1(e) from April 1, 2014 through December 31, 2016; and (z) thereafter, on a royalty-free basis. Both Parties shall negotiate in good faith for up to one hundred and eighty (180) days upon request of either Party at any time during the five-year period after the FA Termination Date to agree on royalty rates for patents filed by each Party after the FA Termination Date. The scope of the licenses as amended pursuant to this Section shall not be greater than the scope of those granted under the Cross License Agreement, as in effect as of the FA Termination Date.

Upon termination of this Agreement resulting from an event of dissolution of Flash Alliance or a Party’s acquisition of the other Party’s FA Shares described in Section 11.3 (Dissolution Upon Event of Default) of the FA Operating Agreement:

The Parties shall further amend the Cross License Agreement to specify that, with respect only to Y4 NAND Flash Memory Products and any other Licensed Products defined in the Cross License Agreement and manufactured with 300mm wafers at any facility, each Party’s patents issued or issuing on patent applications entitled to an effective filing date prior to the FA Termination Date are licensed at the royalty rates specified in Schedule 8.1(g) for seven (7) years after the FA Termination Date or until the end of calendar 2021, whichever comes first, and thereafter such licenses shall be on a royalty-free basis.

In the event that Toshiba or an Affiliate of Toshiba is the Defaulting Party, Toshiba shall grant to SanDisk, effective upon such date of termination, a non-exclusive, non-transferable (except to Affiliates of SanDisk), non-sub-licensable, fully paid-up, royalty-free license to make, have made, use, sell and have sold NAND Flash Memory Products anywhere in the world utilizing the NAND technology transferred to and/or utilized at the Yokkaichi Facility, and SanDisk shall have full access to all such know-how at the Yokkaichi Facility which has been transferred to the Yokkaichi Facility prior to the FA Termination Date.

Upon termination of this Agreement resulting from an event of dissolution described in Section 11.1(f) (Bankruptcy Event) of the FA Operating Agreement:

If such termination is caused by a Bankruptcy Event in respect of Toshiba, (x) the license granted to SanDisk under Toshiba Licensed Patents pursuant to the Cross License Agreement shall continue on a royalty-free basis, and (y) Toshiba shall grant to SanDisk, effective upon such date of termination, a non-exclusive, non-transferable (except to Affiliates of SanDisk), non-sub-licensable, fully paid-up, royalty-free license to make, have made, use, sell and have sold NAND Flash Memory Products anywhere in the world utilizing the NAND technology transferred to and/or utilized at the Yokkaichi Facility, and SanDisk shall have full access to all such know-how at the Yokkaichi Facility which has been transferred to the Yokkaichi Facility prior to the Termination Date.

If such termination is caused by a Bankruptcy Event in respect of SanDisk, the license granted to Toshiba under SanDisk Licensed Patents (as defined in the Cross License

Upon a termination of this Agreement resulting from a purchase and sale transaction described in Section 11.6 (Financing Default) of the FA Operating Agreement, there shall be no capacity ramp-down rights or obligations and:

If such termination is caused by a financing default in respect of Toshiba, (x) the Parties shall further amend the Cross License Agreement to specify that, with respect only to Y4 NAND Flash Memory Products and any other Licensed Products defined in the Cross License Agreement and manufactured with 300mm wafers at any facility, Toshiba’s patents issued or issuing on patent applications entitled to an effective filing date prior to the FA Termination Date are licensed to SanDisk on a royalty-free basis, and (y) Toshiba shall grant to SanDisk, effective upon such date of termination, a non-exclusive, non-transferable (except to Affiliates of SanDisk), non-sub-licensable, fully paid-up, royalty-free license to make, have made, use, sell and have sold NAND Flash Memory Products anywhere in the world utilizing the NAND technology transferred to and/or utilized at the Yokkaichi Facility, and SanDisk shall have full access to all such know-how at the Yokkaichi Facility which has been transferred to the Yokkaichi Facility prior to the Termination Date.

If such termination is caused by a financing default in respect of SanDisk, the Parties shall further amend the Cross License Agreement to specify that, with respect only to Y4 NAND Flash Memory Products and any other Licensed Products defined in the Cross License Agreement and manufactured with 300mm wafers at any facility, SanDisk’s patents issued or issuing on patent applications entitled to an effective filing date prior to the FA Termination Date are licensed to Toshiba on a royalty-free basis.

Restructuring Costs.

In the event this Agreement is terminated, the Parties will exercise best efforts to plan such termination in advance with the goal of minimizing related costs. With respect to Toshiba employees and SanDisk employees working at the Y4 Facility, (i) in the case of those that are Toshiba employees, Toshiba will use its best efforts to retrain or relocate such individuals to other Toshiba facilities, and (ii) in the case of those that are SanDisk employees, SanDisk will use its best efforts to retrain or relocate such individuals to other SanDisk facilities, each to the maximum extent possible.

The Parties agree that in the event of such a SanDisk exit from Flash Alliance, [***]

[***]

[***]

Upon any termination of this Agreement, the Parties shall meet and discuss in good faith an estimate of the Restructuring Costs anticipated to be incurred by Toshiba. [***]

Termination of this Agreement shall not affect any surviving rights or obligations of either Party set forth in the Product Development Agreement and the Common R&D Agreement.

MISCELLANEOUS

Survival. Sections 1.3, 6.10(b)(vii), 6.11, 6.12(d), 8 and 9 and Appendix A shall survive the termination or expiration of this Agreement.

Entire Agreement. This Agreement, together with the exhibits, schedules, appendices and attachments thereto, constitutes the agreement of the Parties to this Agreement with respect to the subject matter hereof and supersedes all prior written and oral agreements and understandings with respect to such subject matter.

Governing Law. This Agreement shall in all respects be governed by and construed in accordance with the internal laws of the State of California applicable to agreements made and to be performed entirely within such state without regard to the conflict of laws principles of such state. Each Master Operative Document shall be governed in accordance with its governing law provision and, in the absence of any such provision, by the first sentence of this Section 9.3.

Assignment. Neither Party may transfer this Agreement or any of its rights hereunder (except for any transfer to an Affiliate or in connection with a merger, consolidation or sale of all or substantially all the assets or the outstanding securities of such party, which transfer shall not require any consent of the other party) without the prior written consent of the other Party (which consent may be withheld in such other Party’s sole discretion), and any such purported transfer without such consent shall be void.

EXHIBIT

(Flash Alliance Documents)

a Bankruptcy Event in respect of such Party or any Person of which such Party is a Subsidiary; or

the breach by such Party of its covenant in Section 9.1 of the FA Operating Agreement or the breach by such Party of its covenant in Section 5.1(b) of the. Master Agreement, provided that a Change of Control of a Party shall not be deemed an Event of Default.

If to SanDisk or SanDisk Ireland:

If to Toshiba:

If to Flash Alliance:

is already known to the Receiving Party at the time of its receipt from the Disclosing Party as reasonably evidenced by its written records; or

is or becomes publicly available without breach of this Agreement by the Receiving Party; or

is made available to a third party by the Disclosing Party without restriction on disclosure; or

is rightfully received by the Receiving Party from a third party without restriction and without breach of this Agreement; or

is independently developed by the Receiving Party as reasonably evidenced by its written records contemporaneous with such development; or

is disclosed with the prior written consent of the Disclosing Party, provided that each recipient from the Receiving Party shall execute a confidentiality agreement prohibiting further disclosure of the Confidential

Information, under terms no less restrictive that those provided in this Agreement; or

is required to be disclosed by the order of a governmental agency or legislative body of a court of competent jurisdiction, provided that the Receiving Party shall give the Disclosing Party prompt notice of such request so that the Disclosing Party has an opportunity to defend, limit or protect such disclosure; or

is required to be disclosed by applicable securities of other laws or regulations, provided that SanDisk shall, prior to any such disclosure required by the U.S. Securities and Exchange Commission, provide Toshiba with notice which includes a copy of the proposed disclosure. Further, SanDisk shall consider i Toshiba’s timely input with respect to the disclosure.

DEFINITIONS, RULES OF CONSTRUCTION AND DOCUMENTARY CONVENTIONS

Certain Definitions.

Capitalized terms used but not defined in the main body of this Agreement shall have the respective meanings assigned to them in that certain Flash Alliance Master Agreement, dated as of the date hereof, among SanDisk, SanDisk Corporation and Toshiba (the “Master Agreement”) or in Appendix A to the Master Agreement.

As used herein, the term “Agreement” means this Operating Agreement together with any Exhibits, Schedules, Appendices and Attachments hereto.

Additional Definitions. The following capitalized terms used in this Agreement shall have the respective meanings assigned in the sections indicated below:

Term

Defined in

“Appendix A”

Recitals

“Articles”

Recitals

“Bankruptcy Event”

Section 11.1(f)

“Claim”

Section 12.4(a)

“Company”

Recitals

“Deadlock”

Section 10.3(c)

“Deadlock Dissolution Notice”

Section 10.3(e)

“Defaulting Shareholder’’

Section 10.4

“Designated Individuals’’

Section 10.3(b)

“Director(s)”

Section 3.5(a)

“Executive Vice President”

Section 5.2(a)

“General Meeting of Shareholders’’

Section 4.l(b)

“Indemnified Party”

Section 12.4(a)

“Indemnifying Party”

Section 12.4(a)

“Initiating Shareholder”

Section 10.3(e)

“Losses”

Section 12.l(a)

“Master Agreement”

Section l.l(a)

“Nondefaulting Shareholder”

Section 10.4

“Notified Patty”

Section 11.5

“Notifying Party”

Section 11.5

“Permissible Assignee”

Section 9. l(c)

·“Permissible Assignment Agreement”

Section 9.l(c)

“President”

Section 5.2(a)

“Responding Shareholder’’

Section 10.3(e)

“SanDisk Representative”

Section 5.3(a)

“Shares”

Recitals

“Shareholder”

Recitals

“Termination Date”

Section 11.4

“Toshiba Representative”

Section 5.3(a)

“Y4 Operating Committee”

Section 5.3(a)

Rules of Construction and Documentary Conventions. The rules of construction, documentary conventions and general terms and conditions set forth in Appendix A shall apply to, and are hereby incorporated in, this Agreement.

GENERAL PROVISIONS

Ownership of Shares; Capital Increase.

The rights and obligations of the Shareholders shall be as set forth herein, subject to the Articles and mandatory provisions of the Companies Act.

The Shareholders shall effect the capital increases in the amounts and at the times stipulated in Schedule 2.1(b).

Name. The name of the Company is “Flash Alliance Yugen Kaisha,” which translates to “Flash! Alliance, Ltd.” in English, and all Company business shall be conducted in that name or such other name as the Shareholders shall mutually agree.

Principal Office. The principal office of the Company shall be located in Yokkaichi, Mie, or such other place as the Shareholders shall mutually agree.

Term: Extension. The Company shall be terminated on December 31, 2021, unless extended by mutual written agreement of all of the Shareholders or earlier terminated in accordance with Section 11 (Dissolution). Any such extension shall be effective only upon the written agreement of all of the Shareholders and shall be on such terms and for such period as set forth in such agreement. The Shareholders agree to meet, no later than December 31, 2020, to discuss the possible extension of the term of the Company.

Scope of Activity. The scope of activity of the Company shall be as set forth in Section 3.1 (Purpose) and 6.7 (Capacity Sharing Arrangement) of the Master Agreement.

Powers. The Company shall have all the powers now or hereafter conferred by applicable law on limited liability companies formed under the Companies Act and may do any and all acts and things necessary, incidental or convenient to the purpose specified in Section 2.5 (Scope of Activity).

Articles of Incorporation. On the date hereof and immediately following the execution of this Agreement, the Shareholders shall hold a general meeting of the Shareholders and, among other matters agreed between them, vote their Shares to amend the Articles so that they will be in the form of Exhibit A. In the event of any conflict between this Agreement and the Articles, the Shareholders confirm their intent that the terms of this Agreement shall prevail, and on the request of either Shareholder, the Shareholders shall amend the Articles to conform with this Agreement to the extent legally possible; provided that the inability to implement such amendment shall not relieve any Shareholder from liability for any breach of its obligations hereunder.

Company Actions. The Shareholders hereby authorize the Company, and ratify (including for purposes of Section 4.1 (Matters Requiring the Approval of the Shareholders)) all action having been taken by or on behalf of the Company (including by its Shareholders and Directors) prior to the date hereof, to execute and deliver the FA Operative Documents to which it is a party, including all certificates, agreements and other documents required in connection therewith.

BUSINESS OPERATIONS

Business Dealings with the Company. Subject to Sections 4.1(a) (Matters Requiring the Approval of the Shareholders) and 5.1(d) (Matters Requiring the Approval of the Board of Directors), the Company may enter into contracts or agreements, or otherwise enter into transactions or dealings, with any Shareholder or any of their respective Affiliates, and derive and retain profits therefrom. The validity of any such contract, agreement, transaction or dealing or any payment or profit related thereto or derived therefrom shall not be affected by any relationship between the Company and any Shareholder or any of their respective Affiliates, subject to the Companies Act. The Shareholders agree that where practicable and contractually allowable (based on competitive price, availability and other material terms), the Board of Directors will consider whether to utilize any Shareholder or any of their respective Affiliates as the preferred providers of products and services that may be required in the manufacturing operations of the Company, subject to the ability of such Shareholder or Affiliate to meet the Company’s manufacturing requirements on competitive terms. Unless otherwise approved by the Shareholders or otherwise expressly provided in the FA Operative Documents, all business dealings of the Company with any Shareholder or any of their respective Affiliates shall be on the most beneficial standard

Other Activities. The provisions- of Section 6.13 (Other Activities) of the Master Agreement are hereby incorporated herein by reference.

Personnel. The provisions of Section 6.10 (FA Management Structure and Headcount) of the Master Agreement are hereby incorporated herein by reference.

Business Plans and Related Matters.

Initial and Subsequent Business Plans. The initial Business Plan of the Company, setting forth the Company’s products, pricing, operating budget, capital expenditures, expense budgets, financing plans and other business activities of the Company through the [***], will be agreed upon and certified by the Board of Directors as soon as practicable after the Closing.

The initial Business Plan and each successive Business Plan will, at the time such Business Plan is in effect, represent the Company’s then-current forecast of the proposed operations of the Company.

An updated Business Plan complying with Section 3.4(b) (Form and Scope) in respect of each successive Fiscal Year after the [***] shall be prepared under the direction of the Chief Executive Officer of the Company and submitted to the Board of Directors for review and approval not later than the [***] preceding the commencement of such Fiscal Year.

When the proposed Business Plan in respect of a Fiscal Year is approved by the Board of Directors, it shall constitute the Business Plan of the Company for such Fiscal Year and the Company and its directors and employees shall implement such Business Plan, which shall be the basis of the Company’s operations for such Fiscal Year. Upon approval, the approved Business Plan shall constitute the approved operational, financing and capital expenditure budget. The Board of Directors shall have the authority pursuant to Section 5.l(d) (Matters Requiring the Approval of the Board of Directors) to amend the most recently approved Business Plan, including the operating budget contained therein, and any Shareholder may request that the Board of Directors review the Company’s operating results and prospects, as well as market conditions, and consider a proposal for amendment or review of the most recently approved Business Plan at any regularly scheduled or special meeting of the Board of Directors and upon such request, the Board of Directors shall in good faith make such review and/or consider such proposal.

Form and Scope. Each Business Plan shall contain a statement of long-range strategy and short-range tactics detailing quantitative and qualitative goals for the Company and relating the attainment of those goals to the Company’s manufacturing objectives, and shall include such items as planned capital expenditures, planned product development, planned product output and projected product cost, sales forecasts, total headcount, total spending and revenue and profit projections, financing plans and tax planning. No Business Plan shall be deemed to be an amendment of this Agreement. Any capital commitments made in any Business Plan for a period after the Fiscal Year to which the Business Plan applies shall be considered non-binding for purposes of any FA Operative Document.

Approval. Other than the initial Business Plan (which shall be approved in accordance with Section 3.4(a)), the Board of Directors shall vote upon the proposed Business Plan, with such modifications as it may deem necessary, before [***] preceding the commencement of each Fiscal Year. Subject to Sections 10.3(c), (e) and (f) (Dispute Resolution; Deadlock), pending approval by the Board of Directors of any proposed Business Plan, the most recently approved Business Plan shall continue in effect; provided, however, the Board of Directors may, by unanimous vote, adopt an amended interim business plan for the Company’s operations until it is able to reach agreement on the proposed Business Plan for the forthcoming year.

Standard of Care.

Each Shareholder, and each director of the Company, as defined in the Companies Act (each, a “Director’’), shall be entitled to rely (unless such Person has knowledge or information concerning the matter in question that makes reliance unwarranted) on information, opinions, reports or statements, including financial statements and other financial data, if prepared or presented by:

one or more managers or employees of the Company who such Shareholder or Director believes in good faith to be reliable and competent in the matters presented; or

legal counsel, public accountants or other Persons as to matters that such Shareholder or Director believes to be within such Person’s professional or expert competence,

Each Shareholder shall also be entitled to rely upon information, opinions, reports or statements, including financial statements and other financial data, prepared or presented by the Board of Directors pursuant to the responsibilities delegated to the Board of Directors pursuant to this Agreement.

Use of Names. Except as may be expressly provided in the FA Operative Documents, nothing in this Agreement shall be construed as conferring on the Company or any Shareholder the right to use in advertising, publicity or other promotional activities any name, trade name, trademark or other designation of any other Shareholder or any of its Affiliates, including any contraction, abbreviation or simulation of any of the foregoing.

ACTIONS BY THE SHAREHOLDERS

Matters Requiring the Approval of the Shareholders.

Notwithstanding any provision of the Articles to the contrary, no action shall be taken by or on behalf of the Company in connection with any of the following matters. without the prior unanimous written approval of the Shareholders:

any amendment, restatement or revocation of the Articles;

any amendment to or renewal of any FA Operative Document between the Company and any Shareholder or any of their respective Affiliates;

any change in the scope of activity or strategic direction of the Company’s business;

any merger, consolidation or other business combination to which the Company or any of its Subsidiaries is a party, or any other transaction to which the Company is a party resulting in a Change of Control of the Company;

any sale, lease, pledge, assignment or other disposition of assets of the Company in an amount (in terms of consideration to be received by the Company) in excess of ¥5,000,000 in one transaction or a series of related transactions, other than as expressly provided for in the FA Operative Documents or as set forth in the most recently approved Business Plan;

the approval of any transaction or agreement between the Company and any Shareholder or any of their respective Affiliates (other than transactions or agreements expressly provided for or authorized by an FA Operative Document or the most recently approve Business Plan) or any amendment thereto (including the waiver of any material term thereof), other than any such transaction, agreement or amendment that contains generally available, arm’s length commercial terms and is in an amount (in terms of payments to be made or the value of services or products to be provided or delivered) less than ¥5,000,000 for any single transaction or agreement or for substantially identical transactions within a 24 month period (or a waiver that does not materially adversely affect the rights and benefits of the Company), other than as set forth in the most recently approved Business Plan;

incurring Indebtedness in an amount in excess of ¥1,000,000 or an increase in aggregate Indebtedness in excess of ¥1,000,000 in any calendar quarter, other than as authorized by Section 5.1(d) (Matters Requiring the Approval of the Board of Directors);

with respect to the Company or any of its Subsidiaries, (A) the voluntary commencement of any proceeding or the voluntary filing of any petition seeking relief under Japanese or foreign bankruptcy, insolvency, receivership or similar law, (B) the consent to the institution of, or the failure to contest in a timely and appropriate manner, any involuntary proceeding or any involuntary filing of any petition of the type described in clause (A) above, (C) the application for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company, or for a substantial part of its property or assets, (D) the filing of an answer admitting the material allegations of a petition filed against the Company in any such proceeding described above, (E) the consent to any order for relief issued with respect to any such proceeding described above, (F) the making of a general assignment for the benefit of creditors, (G) the admission in writing of the Company’s inability, or the failure of the Company generally, to pay its debts as they become due or (H) the taking of any action for the purpose of effecting any of the foregoing;

subject to Section 9.1(a) and Appendix A, the granting of consent to the transfer of any Shares;

the winding up, dissolution or liquidation of the Company or any of its Subsidiaries (other than the dissolution of the Company pursuant to and as contemplated by Section 11 (Dissolution));

the acquisition of any business, entry into any joint venture or partnership, or creation of any direct or indirect Subsidiary of the Company;

the commitment of the Company to any development project;

the sale, license, assignment or other Transfer of any of the Company’s intellectual property owned or in its possession (including any technology or

any increase or decrease in the capital amount of the Company, whether by increasing the number of the Shares or otherwise;

any other matter material to the operation, staffing, business or financial condition of the Company; and

any matter required by the Companies Act to be decided, in the case of a limited liability company (tokurei yugen kaisha) by its shareholders.

Each Shareholder may exercise its vote by proxy; provided, that such proxy shall submit to the Company, prior to the relevant General Meeting of Shareholders, as defined in the Companies Act (the “General Meeting of Shareholders”), a power of attorney duly signed by the Shareholder and/or other document establishing its power of representation; and provided, further, that the conferment of the power of proxy for one General Meeting of Shareholders shall not be deemed to be a conferment of the power of proxy for any subsequent General Meeting of Shareholders.

Notwithstanding the requirements of Section 4.1(a) (Matters Requiring the Approval of the Shareholders) relating to agreements between the Company and any Shareholder or any of their respective Affiliates, any question regarding a material default or alleged material default (including any question regarding a breach of representation or alleged breach of representation) under any FA Operative Document between the Company and any Shareholder or any of their respective Affiliates shall be subject to the dispute resolution process set forth in Sections 10.3(a) and (b) (Dispute Resolution; Deadlock).

General Meetings of Shareholders.

An annual General Meeting of Shareholders shall be held within three (3) months from the date immediately following the last day of each fiscal Year of the Company. A special General Meeting of Shareholders may be held at any time and may be called by a resolution of the Board of Directors or in any other manner permitted by the Companies Act or the Articles. All General Meetings of Shareholders shall be called and held in accordance with the Articles and the Companies Act. The General Meetings of Shareholders may be held at the Company’s principal office or at any other location, or, if all the Shareholders agree, and to the extent then permitted by the Companies Act, by telecommunications conferences by means of which all persons participating in the meeting can hear and be heard by each other, provided that such communications equipment continues to be operational throughout the meeting. To the extent then permitted by the Companies Act, the Shareholders may by unanimous written consent effect any resolution that could otherwise be resolved at a meeting of the Shareholders.

Except as otherwise provided in this Agreement, each Shareholder shall be entitled to one vote for each Share owned by such Shareholder.

The minutes of every General Meeting of Shareholders shall be kept with the· Company’s records referred to in Section 5.5 (Records).

The quorum necessary for any General Meeting of Shareholders shall be those Persons entitled to cast all of the votes held by the Shareholders. A quorum shall be deemed not to be present at any meeting for which notice was not properly given under the Articles or the Companies Act, unless the Shareholder as to whom such notice was not properly

Restrictions on Shareholders. No Shareholder may, without the prior written consent of the other Shareholder:

confess any judgment against the Company;

enter into any agreement on behalf of or otherwise purport to bind the other Shareholder or the Company;

do any act in contravention of this Agreement;

except as contemplated by Section 11 (Dissolution), dispose of the goodwill or the business of the Company; or

assign the property of the Company in trust for creditors or on the assignee’s promise to pay any Indebtedness of the Company.

MANAGEMENT AND OPERATIONS OF COMPANY

Meetings of the Board of Directors.

General. The Shareholders agree to form a steering committee consisting of Directors nominated by each of the Shareholders. The Shareholders acknowledge and agree that while. under the Companies Act a limited liability company (tokurei yugen kaisha) does not have a board of directors, for convenience they will in this Agreement (and elsewhere in the FA Operative Documents) refer to such committee as the “Board of Directors’’ (“yakuin kai”). Except as otherwise provided herein, as between the parties the Board of Directors is vested with complete and exclusive power to direct and control the Company and to manage the Company as provided by the Articles and this Agreement, as it may be amended from time to time. The Board of Directors shall have the power to delegate such responsibilities as it’ may deem appropriate from time-to-time (including certain day-to-day responsibilities set forth in Section 5.2 (Officers; Employees) and Section 5.3 (Y4 Operating Committee)). The Shareholders shall cooperate in taking any necessary corporate steps under the Companies Act to attain the purposes of this Section 5, including without limitation, approval by the Directors and general meeting of shareholders with respect to decisions made by the Board of Directors.

Members of the Board of Directors; Voting; etc.

The Board of Directors of the Company shall consist of six (6) Directors, three (3) of which shall be nominated by Toshiba, and the other three (3) of which shall be nominated by SanDisk; provided that the total number of Directors of the Company may be changed by mutual agreement of the Shareholders. Each Shareholder shall vote its Shares to elect as Directors those persons nominated by the other Shareholder.

Directors shall be elected to serve until complete adjournment of the annual meeting of Shareholders for the fiscal year last to end within one (1) year after his or her assumption of the directorship, and shall be eligible for re-election.

Subject to the fiduciary duty of Directors under the Companies Act, each Director shall serve at the pleasure of the designating Shareholder and may be removed as such, with or without cause, and his successor designated, by the designating Shareholder. Each Shareholder shall have the right to designate a replacement

Each Shareholder shall bear any cost incurred by any Director nominated by it to serve on the Board of Directors, and no Director shall be entitled to compensation from the Company for serving in such capacity.

Each Shareholder shall notify the other Shareholder and the Company of the name, business address and business telephone, e-mail address and facsimile numbers of each Director that such Shareholder h s nominated. Each Shareholder shall promptly notify the other Shareholder and the Company of any change in such Shareholder’s nominated or of any change in any such address or number.

For purposes of any approval or action taken by the Board of Directors, each Director shall have one vote. Unless otherwise required under Japanese law, unanimous agreement of all Directors is required for valid action to be taken by the Board of Directors.

At any meeting of the Board of Directors, each Director may exercise his vote by proxy; provided, that such proxy shall submit to the Company, prior to the relevant meeting, a power of attorney duly signed by the Director and/or other document establishing its power of representation; and provided, further, that the conferment of the power of proxy for one meeting of the Board of Directors shall not be deemed to be a conferment of the power of proxy for any subsequent meeting of the Board of Directors.

The quorum necessary for any meeting of the Board i of Directors shall be those Directors entitled to cast all of the votes held by the members of the Board of Directors. A quorum shall be deemed not’ to be present at any meeting for which notice was not properly given under Section 5.l(c) (Meetings, Notices, etc.), unless the Director or Directors as to whom such notice was not properly given attend such meeting without protesting the lack of notice or duly execute and deliver a written waiver of notice or a written consent to the holding of such meeting.

Meetings, Notice, etc. Meetings of the Board of Directors shall be held at such location or locations as may be selected by the Board of Directors from time to time.

Regular meetings of the Board of Directors shall be held on such dates and at such times as shall be determined by the Board of Directors and shall be held at least on a quarterly basis, unless otherwise agreed by the Directors.

Notice of any regular meeting or special meeting pursuant to Section 5.l(c)(iii) shall be given to each Director at least ten (10) Business Days prior to such meeting in the case of a meeting in person or at least five (5) Business Days prior to such meeting in the case of a meeting by conference telephone or similar communications equipment pursuant to Section 5.l(c)(vii), which notice shall state the purpose or purposes for which such meeting is being called and include any supporting documentation relating to any action to be taken at such meeting.

Special meetings of the Board of Directors may be called by any Director by notice given in accordance with the notice requirements set forth in Section 5.l(c)(ii); provided that the Directors appointed by the Shareholder that is not

Each Shareholder may invite a reasonable number of observers to all meetings of the Board of Directors.

The minutes of each meeting of the Board of Directors shall be delivered to all Directors within twenty (20) calendar days after such meeting. Material to be presented at a Board of Directors meeting shall be delivered to all Directors ten (10) Business Days prior to such meeting if feasible in light of the circumstances giving rise to the need for such meeting, or in any event a minimum of five (5) Business Days prior to such meeting.

The actions taken by the Board of Directors at any meeting, however called and noticed, shall be as valid as though taken at a meeting duly held after regular call and notice if (but not until), either before, at or after the meeting, each Director as to whom such meeting was improperly held duly executes and delivers a written waiver of notice or a written consent to the holding of such meeting; provided, however, any Director who is present at a meeting and does not protest the failure of notice shall be deemed to have received adequate notice thereof. A vote of the Board of Directors may be taken only (A) at a meeting of the members thereof duly called and held or (B) without a meeting by the execution by the Directors eligible to cast all the votes on the Board of Directors of a consent setting forth the action so taken, and identified as a unanimous written consent of the Directors.

Upon the consent of both Representative Directors, meetings of the Board of Directors may be held by conference telephone or similar communications equipment by means of which all Directors participating in the meeting can be heard by all other participants; provided that such communications equipment continues to be operational throughout the meeting. Any Director may elect to participate in a meeting by conference telephone or similar communications equipment upon sufficient advance notice to permit arrangements therefor to be made.

At each meeting, the Board of Directors shall consider (A) any of the items set forth in Section 5.l(d) (Matters Requiring the Approval of the Board of Directors) that may require the Board of Directors’ attention, (B) any items added to the Board of Directors’ agenda for discussion by any Shareholder and (C) such other matters as the Board of Directors decides to review; provided, however, that the Directors shall not be required to vote or take other action (other than carrying on discussions) on matters that were not placed on the meeting agenda at least five (5) Business Days in advance of the time set for the meeting unless such action or business is incidental to the action or business which was otherwise properly on the agenda and considered at such meeting.

The Board of Directors shall, from time to time, elect one of its members to preside at its meetings. The Board of Directors may establish reasonable rules and

Subject to the Companies Act, the Board of Directors shall have the authority to establish subcommittees and to delegate to any such subcommittee any of the Board of Directors’ responsibilities; provided, however, the power of the Board of Directors to approve the matters set forth in Section 5.1(d) (Matters Requiring the Approval of the Board of Directors) may not be delegated to a subcommittee.

Matters Requiring the Approval of the Board of Directors. Notwithstanding any provision of the Articles to the contrary, no action may be taken by or on behalf of the Company in connection with any of the following matters without the unanimous written approval of the Board of Directors:

any sale, lease, pledge, assignment or other disposition of assets of the Company in an amount (in terms of consideration to be received by the Company) in excess of ¥1,000,000 in one transaction or a series of related transactions, other than as set forth in the most recently approved Business Plan;

the approval of any transaction or agreement between the Company and any Shareholder or any of their respective Affiliates (other than transactions or agreements expressly provided for or authorized by an FA Operative Document or the most recently approved Business Plan) or any amendment thereto (including the waiver of any material term thereof), other than any such transaction, agreement or amendment that contains generally available, arm’s length commercial terms and is in an amount (in terms of payments to be made or the value of services or products to be provided or delivered) less than ¥1,000,000 for any single transaction or agreement or for substantially identical transactions within a 24 month period (or a waiver that does not materially adversely affect the rights and benefits of the Company), other than as set forth in the most recently approved Business Plan;

the purchase, lease, license or other acquisition of (A) personal property or services or (B) any list of capital equipment approved by the Shareholders, in each case in an amount (in terms of payments to be made or the value of services of products to be provided or delivered) exceeding ¥1,000,000 in any one transaction or a series of related transactions, other than as provided for in the most recently approved Business Plan;

the selection of attorneys, accountants, auditors and financial advisors;

the adoption of accounting and tax policies, procedures and principles;

incurring any Indebtedness;

the hiring or termination of any employees referenced in Section 5.2(a) (Officers; Employees) who are not members of the SanDisk Team, if any;

the adoption of or changes to the forms of confidentiality, assignment or disclosure of intellectual property or employment agreements to be entered into between the Company and its employees;

the adoption of or changes to any employee benefit plan, including any incentive compensation plan;

the amount and timing of any distributions;

the commencement or settlement of litigation by or against the Company;

the purchase, sale or lease (as lessor or lessee) of any real property;

any acquisition of securities or any other ownership interest in any entity;

the making of any public announcements by or on behalf of the Company; provided, that in any case any such public announcements must otherwise comply with the requirements of Section 5.2 (Public Announcements) of the Master Agreement, if applicable;

the entry into or amendment of any collective bargaining arrangements or the waiver of any material provision or requirement thereof;

the approval of a proposed Business Plan, or the amendment to the most recently approved Business Plan, in each case including the operating budget contained therein;

the incurrence of capital expenditures in excess of those provided for in the most recently approved Business Plan or the commitment of the Company to any development projects other than as provided for in the most recently approved Business Plan;

subject to Section 5.1(c)(x), the establishment of any subcommittees or delegation of authority of the Board of Directors;

the authorization and approval of any filing with, public comments to, or negotiation/discussion with, any Governmental Authority (excluding regular operating filings and other routine administrative matters);

the approval of Unique Activities to be performed by the Company at the request of any Shareholder, in connection with which the Board of Directors shall be satisfied that such Shareholder has reached agreement with the Company as to the payment by such Shareholder of all costs incurred in connection with such Unique Activities and that adequate provision has been made by such Shareholder for the funding of any additional required capital expenditures required in conjunction with such Unique Activities;

the decision of the Company to negotiate external sources of additional wafer fabrication capacity for NAND Flash Memory Products;

any dispute referred to the Board of Directors by the Y4 Operating Committee pursuant to Section 5.3(b); and

such other matters as the Board of Directors decides, in its sole discretion, to review.

Officers; Employees.

Unless otherwise mutually agreed by the Shareholders, the Directors of the Company with specific titles shall be designated as the Representative Director/President/Chief Executive Officer (“President”) and the Representative Director/Executive Vice President

The President shall have the authority to retain other senior management of the Company, subject to the prior approval of the Board of Directors.

The Company shall have agreements with and policies applicable to each of its officers, employees and consultants who are not members of the SanDisk Team, in forms acceptable to each Shareholder, and shall also have appropriate arrangements with its members of the SanDisk Team, in each case with respect to (i) protection of confidential information, (ii) patent and copyright assignment, (iii) invention disclosure (including improvements and advances) and assignments thereof and (iv) in respect of certain employees who are not members of the SanDisk Team, non competition.

Y4 Representatives: Y4 Operating Committee.

The Company shall have an Operating Committee for Y4 Facility operations (the “Y4 Operating Committee”) consisting of a senior executive designated by each of SanDisk and Toshiba (each such individual the “SanDisk Representative’’ and the “Toshiba Representative,” respectively) each of whom shall represent the designating Party on a day-to-day basis at the Y4 Facility. Each Shareholder shall notify the other Shareholder in advance of any replacement of its representative. If a Shareholder requests in good faith that the other Shareholder’s representative be replaced with another person from the other Shareholder’s organization, the other Shareholder shall consider and discuss in good faith with the requesting Shareholder such request, provided that such replacement, if any, shall be determined solely by such other Shareholder. [***]

The Y4 Operating Committee shall work together and endeavor to make the Y4 Facility the most advanced and competitive memory fabrication facility in the world. The Y4 Operating Committee shall have the authority to determine all matters concerning the day-to-day operations of the Company and the Y4 Facility [***] subject to those matters reserved herein to the Board of Directors or the Shareholders as well as to the requirements of this Agreement, the Articles and the Companies Act The Y4 Operating Committee shall communicate on a day-to-day basis with respect to the status of Y4 Facility operations and any other issues that may arise, and shall meet in person no less than two (2) times per week, or such other times and frequency as may be agreed upon by all members of such committee. If the members of the Y4 Operating Committee are unable to agree on any issue after thirty (30) days, they shall submit such matter together with their respective recommendations to the Board of Directors, which shall endeavor to immediately resolve the issue. If the Board of Directors is unable to agree on any such issue after ten (10) days, such issue shall be submitted to the Management Committee for final resolution.

The Y4 Operating Committee shall hold a monthly review meeting in English at the Yokkaichi Facility on [***] of each calendar month, unless otherwise agreed by the Shareholders or the Y4 Operating Committee. The Y4 Operating Committee shall prepare and distribute to each Shareholder (at least three Business Days in advance of the monthly review meetings) monthly reports in English with respect to the engineering activities, operations and financial affairs of the Company and the Y4 Facility.

Upon the request of either Shareholder, the Y4 Operating Committee shall provide the Shareholders with (i) any management or operation reports of the Company related to the Y4 Facility (which neither Shareholder shall have an obligation to translate) and (ii) simultaneously in Japanese and English, those management and operating reports identified on Schedule 5.3 as mutually agreed upon from time to time by the Parties. Upon reasonable request from SanDisk, Toshiba employees shall explain such reports to SanDisk’s employees and respond to questions from SanDisk’s employees; provided, however that SanDisk acknowledges and agrees that Toshiba shall not be responsible for SanDisk’s failure to understand any such reports.

Insurance. The Company shall maintain insurance against such liabilities and other risks associated with the conduct by the Company of its business and in such amounts and against such risks as agreed by the Shareholders, and in any event as is generally maintained by companies engaged in a business similar to that of the Company.

Records. The Company shall maintain the following records at its principal office:

a current list of the full name set forth in alphabetical order and last known business address of each Shareholder and Director;

a copy of the Articles, and all articles of amendment thereto;

a copy of this Agreement and all amendments hereto;

a copy of all financial statements of the Company for the three most recent Fiscal Years;

a copy of the Company’s income tax or information returns and reports, if any, for the three most recent years;

a copy of all indentures, loan agreements, lease agreements, guarantees, security , agreements, promissory notes, licensing or other intellectual property agreements, agreements that relate to the payment or receipt by the Company of amounts in excess of ¥5,000,000 or that are not terminable by the Company upon ninety (90) days’ notice, documents, if any, evidencing employee compensation arrangements, employee pension or other benefit arrangements, and similar documents and instruments executed and delivered by the Company;

a list of all contributions made to the Company by the Shareholders; and a record of all distributions by the Company to each Shareholder.

CAPITAL CONTRIBUTIONS; DISTRIBUTIONS

Capital Contributions.

The Shareholders shall be deemed to have made Capital Contributions to the Company in the amounts set forth opposite their respective names on Schedule 6.1.

Except as provided in Section 2.1(b), no Shareholder shall be obligated to make any additional Capital Contributions to the Company, unless otherwise mutually agreed upon by the Shareholders in writing, in which case such additional Capital Contributions shall be made in proportion to the Shareholders’ respective Percentages as of the date of such additional Capital Contribution.

Distributions.

General. Notwithstanding any provision of the Articles to the contrary, and subject to Section 11.8 (Liquidation Proceeds), unless otherwise agreed by the Shareholders, no distributions of cash (or in the case of Section 11.8, other property) shall be made by the Company to the Shareholders for a period of three (3) years from the date of this Agreement, and thereafter all distributions of cash (or, in the case of Section 11.8, other property) by the Company to the Shareholders shall be made in Japanese Yen at the times and in the amounts determined by the Board of Directors. Except as provided in Section 11.8, each distribution to the Shareholders shall be made on a pro rata basis based upon the respective Percentages of the Shareholders as of the date of such distribution.

Distribution for Taxes. Notwithstanding Section 6.2(a), subject to the Companies Act and other applicable law, the Company shall make, in respect of each Fiscal Year in which SanDisk must recognize taxable income of the Company in SanDisk’s US federal, state and local income and franchise tax returns, a distribution to SanDisk to the extent necessary to meet SanDisk’s aggregate US tax liability with respect to such taxable income, with such liability calculated at the highest US, state and local corporate tax rates as may be then applicable to SanDisk. SanDisk will make a request upon the Company for such distribution as soon as is practicable after the filing of SanDisk Corporation’s applicable US tax returns. Following receipt of such request, the Company shall make the requested distribution on the next date on which the Company is permitted to make distributions pursuant to the Companies Act. Simultaneously therewith, the Company shall also make a distribution to Toshiba in an amount equal to the amount of the per Share distribution made to SanDisk pursuant to this Section 6.2(b). Any such prior distributions shall be taken into account upon any purchase and sale of Shares under Section 10 (Certain Agreements of the Shareholders) or dissolution of the Company under Section 11 (Dissolution) hereof. If necessary, the Board of Directors shall consider capital reductions to the extent that any such capital reduction will not adversely affect the Y4 Facility’s operations.

No Interest. No interest shall be payable to the Shareholders on their Capital Contributions or otherwise in respect of the capital of the Company.

Return of Capital Contributions. Except as expressly provided herein, no Shareholder shall be entitled to the return of any part of such Shareholder’s Capital Contributions.

ADDITIONAL CONTRIBUTIONS

ACCOUNTING AND TAXATION

Financial Accounting Conventions.

The Company shall adopt and follow Japanese GAAP.

Notwithstanding anything to the contrary in Appendix A, the first Fiscal Year shall begin on the date of formation of the Company and end on March 31, 2007.

The Company shall in principle (but subject to applicable Law) utilize a five-year straight line depreciation method for manufacturing equipment.

Maintenance of Books of Account. The Company shall keep or cause to be kept at its principal office, or such other location as the Board of Directors shall designate, full and complete books of account. The books of account shall be maintained in a manner that provides sufficient assurance that transactions of the Company are recorded so as to comply with all applicable laws and to permit (a) the preparation of the Company’s consolidated financial statements in accordance with Japanese GAAP and (b) the Shareholders to account for their interest in the Company in accordance with Japanese GAAP.

Financial Statements.

Annual Statements. As soon as practicable following the end of each Fiscal Year (and in any event not later than fifty-two (52) days after the end of such Fiscal Year), the Company shall prepare and deliver to each Shareholder and each Director, audited consolidated and consolidating balance sheets of the Company as of the end of such Fiscal Year and the related audited consolidated and consolidating statements of operations, the Shareholders’ capital accounts and cash flows of the Company for such Fiscal Year (or similar statements if such statements change as the result of changes in Japanese GAAP), together with appropriate notes to such consolidated financial statements, and in each case setting forth in comparative form the corresponding figures for the preceding Fiscal Year and for the budget for the Fiscal Year just completed. Such financial statements shall be accompanied by (i) the report of the Accountants to the effect that such financial statements (except for the comparison to the budget) have been prepared in conformity with Japanese GAAP (except as otherwise specified in such report) and that the audit of such financial statements has been performed in accordance with Japanese GAAP and (ii) a report as to all transactions (including the nature, type and amount) between the Company and each Shareholder and their respective Affiliates. The Company shall conduct its business such that the report of the Accountants shall not contain any qualifications as to the scope of the audit or with respect to the Company’s compliance with Japanese GAAP, except for changes in methods of accounting in which such Accountants concur and except that the foregoing shall not be deemed to obligate any Shareholder to contribute any capital to the Company. The Company shall also provide SanDisk with an English version of such report, which shall contain sufficient data to enable SanDisk to prepare a reconciliation of the Company’s financial reports from Japanese GAAP to United States GAAP. The Company shall deliver to SanDisk, at SanDisk’s request and expense, any other financial information related to the Company that is reasonably requested by SanDisk for US Federal, state, and local income or franchise tax purposes.

Quarterly Statements.

As soon as practicable following the end of each Fiscal Quarter (and in any event not later than ten (10) days after the end of such Fiscal Quarter), the Company shall prepare and deliver to each Shareholder and each Director unaudited consolidated and consolidating balance sheets of the Company as of the. end of

The financial statements for such Fiscal Quarter shall be accompanied by a certificate of the principal accounting or financial officer of the Company to the effect that such financial statements have been prepared under such officer’s supervision and that, although such financial statements do not contain the footnotes and other disclosures required to be presented in interim financial statements by Japanese GAAP, such financial statements, in such officer’s judgment, fairly present the financial condition and results of operations of the Company as of the date and for the periods indicated, subject to normal recurring year-end audit adjustments. The Company shall deliver to SanDisk, at SanDisk’s request and expense, any other financial information related to the Company that is reasonably requested by SanDisk for US financial reporting or Federal, state, and local income or franchise tax purposes.

The Company shall obtain a professional tax audit from a qualified accountant complying with Japanese GAAP by May 22 of each year (including an English translation thereof). As part of its engagement of its auditors, the Company shall cause its auditors to provide such English language financial statements, audit reports, US GAAP reconciliations and consents as are required (or reasonably requested by SanDisk) in connection with SanDisk Corporation’s filings with the United States Securities and Exchange Commission; provided that SanDisk shall pay for all the costs relating to such auditors’ work. SanDisk may also request that the Company provide SanDisk with “comfort letters’’ in the manner customary for Japanese auditors in connection with public offerings in the United States, at SanDisk’s own expense.

Monthly Reports. Each month, the Company shall prepare and deliver to each Shareholder and each Director the reports and other information set forth on Schedule 8.3. Such reports and other information will become available at the respective times set forth on Schedule 8.3.

Business Plan. Subject to Sections 10.3(c), (e) and (f), and provided that the most recently approved Business Plan does not provide for the next Fiscal Year, the Company shall, not later than [***] prior to the commencement of each Fiscal Year, deliver to each Shareholder a copy of the Business Plan, including the Company’s monthly budgets, for the upcoming Fiscal Year, as approved by the Board of Directors.

Legal Proceedings. The Company shall promptly inform each Shareholder and each Director with regard to litigation, governmental investigations, material government notices and threatened legal proceedings.

Other Reports and Inspection. The Company shall furnish promptly to each Shareholder such other reports, financial data and information relating to the Company as such Shareholder may reasonably request and shall require the Accountants to provide to each Shareholder copies of any document related to the Company in the possession of the Accountants as such Shareholder may reasonably request. The Company shall, upon reasonable prior notice and during normal business

Deposit of Funds. All funds of the Company and its Subsidiaries not otherwise employed shall be deposited from time to time to its credit in such banks, trust companies or other depositories, or invested in such other investments held as cash equivalents, as the Board of Directors shall authorize. The funds of the Company and its Subsidiaries shall not be commingled with the funds of any Shareholder or any of their respective Affiliates.

SHARES OF CONTRIBUTION; DISPOSITION OF SHARES

Restrictions on Transfer of Shares.

No Shareholder (nor any permitted transferees of any Shareholder) may Transfer any interest in the Company, including any of such Shareholder’s Shares, to any Person, except by a Change of Control; provided, that any Shareholder may Transfer all of its interest in the Company, including all of its Shares, subject to the Companies Act, to any one (1) of their respective Affiliates, with the prior written consent of every other Shareholder, which consent shall not be unreasonably withheld; and provided, further, that (i) the transferee agrees in writing to become a party hereto and assumes all the obligations of the transferring Shareholder hereunder and under each other FA Operative Document to which the transferring Shareholder is a party (except to the extent the express terms of the Patent Indemnification Agreement condition its transferability on the consent of the non-transferring Shareholder and such Shareholder has not consented to Transfer thereof), and (ii) immediately after giving effect to such Transfer, no Event of Default or an event or condition that with the giving of notice or lapse of time or both would constitute an Event of Default with respect to the transferee Shareholder shall exist. Following the effectiveness of any such Transfer, the transferring Shareholder shall no longer have the transferred right, title or interest in the Company or any rights under this Agreement and the transferee shall be substituted as a Shareholder for all purposes of this Agreement. The transferring Shareholder shall, however, remain responsible for all obligations under this Agreement and the other FA Operative Documents for any transferee which is an Affiliate of the transferring Shareholder and shall not be released or discharged from any existing liability or obligation to any Person. Any subsequent Transfer of an ownership interest in such Affiliate by the transferring Shareholder shall be deemed to constitute a Transfer of Shares requiring compliance with this Section 9.1.

If a Shareholder Transfers its entire interest in the Company pursuant to Section 9.1(a), the transferee shall succeed to all the rights and obligations of such Shareholder under this Agreement.

Any Shareholder may agree to pay amounts equal to distributions received by such Shareholder from the Company to a third party in its sole discretion pursuant to a

provides for the grant by such Shareholder to the Permissible Assignee of the right to receive amounts equal to distributions received by such Shareholder from the Company pursuant to Section 6 or 11 of this Agreement, but does not give the Permissible Assignee any Shares or any other rights whatsoever with respect to the Company;

provides that under no circumstances (including any Bankruptcy Event in respect of such Shareholder) may any claim be made by the Permissible Assignee against the Company or any such Shareholder or any Affiliate of any such Shareholder or any of their respective assets, under or in connection with such agreement, even if such Shareholder defaults in performance thereunder;

provides that the rights of the Permissible Assignee under such agreement may not be transferred without the prior written consent of each Shareholder and that any such Transfer without such consents shall be null and void;

may not be amended, nor any provision thereof waived, in a manner that would cause it not to be a Permissible Assignment Agreement, without the prior written consent of the non-assigning Shareholder;

provides that the assigning Shareholder is authorized to Transfer its entire interest in the Company pursuant to Section 9.1(a) free and clear of any interest of the Permissible Assignee and without any liability on the part of the transferee thereunder to the Permissible Assignee; and

contains an express acknowledgment by the Permissible Assignee, for the benefit of the non-assigning Shareholder and the Company, to the effect of clauses (i)-(v) above.

The assigning Shareholder shall ensure that any payment due to a Permissible Assignee pursuant to or in connection with a Permissible Assignment Agreement shall be made in full to such Permissible Assignee when due.

Admission of New Shareholders. No Person shall have the right to become a Shareholder unless and until all the following conditions are satisfied:

except in the case of a Transfer of all of a Shareholder’s Shares to an Affiliate of such Shareholder in accordance with Section 9.l(a) (Restrictions on Transfer of Shares), such Person, the terms and conditions of such Person’s admission as a Shareholder and the rights appurtenant to the Shares to be issued or Transferred, as applicable, to such Person are approved by all existing Shareholders and, if applicable, the creation of any new class or group of Shares in the Company having different rights, powers and duties is reflected in amendments to the Articles and to this Agreement;

such Person executes a counterpart of this Agreement and such other instrument or instruments as the Company and a non-transferring Shareholder may reasonably deem appropriate to affirm that the representations and warranties contained in the Master Agreement are true and correct with respect to such Person and that such Person agrees to be bound as a Shareholder by this Agreement and all of the covenants and agreements herein; and

if requested by the Company, an opinion of counsel, a purchaser representation letter or other appropriate documentation is furnished to the Company establishing that the issuance or Transfer, as applicable, of Shares to the new Shareholder will comply with the Companies Act.

Withdrawal Prohibited. Except as otherwise expressly permitted by this Agreement, (i) no Shareholder may withdraw from the Company and (ii) no Shareholder may effect or cause a termination or dissolution of the Company without the prior written consent of all other Shareholders (which consent may be withheld in such other Shareholder’s sole discretion).

Purchase of Additional Interest. At any time during the term of this Agreement and so long as SanDisk is a Shareholder, SanDisk shall have the right to purchase from Toshiba that number of Shares which is equal to 0.1% of the total number of Shares then issued and outstanding in the event that (i) Toshiba’s patent umbrella does not adequately protect the Company or (ii) dissolution of the Company is commenced pursuant to Section 11 hereof. The purchase price of such Shares shall equal [***] as of the date of such transaction.

CERTAIN AGREEMENTS OF THE SHAREHOLDERS

Truces and Charges; Governmental Rules. Each Shareholder shall (a) promptly pay all applicable Taxes and other governmental charges imposed against such Shareholder except to the extent any such Taxes or other charges are being contested in good faith by appropriate proceedings and (b) comply with all applicable Governmental Rules, in each case except to the extent that nonpayment or noncompliance will not have a material adverse effect on the Company.

Further Assurances. Following the Closing, each Shareholder shall, and shall cause its Affiliates and the Company to take all reasonable actions necessary or appropriate to, effectuate the transactions contemplated by this Agreement, and to obtain (and cooperate with the other Shareholder in obtaining) any Governmental Action or third party consent required to be obtained or made by it in connection with the transactions contemplated by this Agreement; provided, that no Burdensome Condition shall be made to exist with respect to such Shareholder or any of its Affiliates in connection therewith.

Dispute Resolution; Deadlock.

The Shareholders shall endeavor to settle, through their respective designees to the Board of Directors, any disputes· which may arise between them, including without limitation, failure by the Board of Directors to reach agreement (or failure to take a vote) on any matter requiring Directors approval pursuant to Section 5.1(d) (Matters Requiring the Approval of the Board of Directors). The Shareholders shall attempt to resolve the issue or proposed action in question, to the extent practicable, in a manner consistent with the Company’s most recently approved Business Plan, unless the issue in dispute is the adoption of a new Business Plan, in which case the provisions of Sections 10.3(c), (e) and (f) shall apply.

If (i) the Shareholders are unable to agree on any matter requiring the approval of the Shareholders pursuant to Section 4.l(a) (Matters Requiring the Approval of the Shareholders), (ii) the Board of Directors is unable to agree on any matter requiring the approval of the Board of Directors pursuant to Section 5.1 (d) (Matters Requiring the

Except as provided below, if by [***] of any calendar year during the term of this Agreement, commencing [***], the Board of Directors and the Shareholders have not approved and agreed upon a Business Plan for the upcoming Fiscal Year, then any Shareholder may refer the dispute to the Management Committee for a decision, which decision shall be final and binding on the Company and the Shareholders. If a decision is reached by agreement of the Management Committee, such decision shall be implemented by the Company. Should no decision be reached within ninety (90) days after submission of the matter to the Management Committee, and unless the Shareholders have agreed to continue operations under the most recently approved Business Plan until a new Business Plan is approved, then within ten (10) Business Days thereafter any Shareholder may elect by written notice to all other Shareholders to declare a deadlock (“Deadlock”), except with respect to any issue where the Master Agreement expressly prohibits declaration of a Deadlock.

If demand for both Shareholder’s NAND Flash Memory Products is significantly below expectations, they shall address the matter as contemplated in Section 6.7(b)(ii) of the Master Agreement.

Within thirty (30) days after a Shareholder has notified :the other Shareholder of a Deadlock, either Shareholder (the “Initiating Shareholder”) may submit to the other Shareholder (the “Responding Shareholder”) a written irrevocable notice (the “Deadlock Dissolution Notice”) to the effect that the Initiating Shareholder offers to sell to the Responding Shareholder or its designee the Initiating Shareholder’s Shares for a cash payment, by wire transfer of immediately available Japanese Yen, in an amount equal to the [***] as of the date of such transaction multiplied by the Initiating Shareholder’s Percentage as of such date.

The Responding Shareholder may accept such offer by written response to the Initiating Shareholder within forty”-five (45) days of receipt of the Deadlock Dissolution Notice indicating that the Responding Shareholder elects to purchase the Shares of the Initiating Shareholder. If the Responding Shareholder declines to exercise its right to purchase the Shares of the Initiating Shareholder pursuant to this Section 10.3 or fails to respond to

Upon Event of Default: Termination on Breach. If there has occurred and is continuing an Event of Default with respect to a Shareholder (upon: such occurrence, such Shareholder is referred to herein as the “Defaulting Shareholder’’), in addition to all other remedies available to the Company or the other Shareholder (the “Nondefaulting Shareholder’’), whether under any of the FA Operative Documents or other agreements or by law, the Nondefaulting Shareholder shall have the option to take one or more of the following actions:

give written notice to the Defaulting Shareholder of its intention to acquire all of the Shares of the Defaulting Shareholder for a cash payment, by wire transfer of immediately available Japanese Yen, in an amount equal to the [***] as of the date of such transaction multiplied by the Defaulting Shareholder’s Percentage as of such date; and/or

elect to dissolve the Company pursuant to Section 11.3 (Dissolution Upon Event of Default), in which case the affairs of the Company shall be wound up and the Company shall be dissolved in accordance with Section 11 (Dissolution).

Mechanics of Sale.

The closing of any purchase and sale of Shares pursuant to Section 10.3 (Dispute Resolution; Deadlock), 10.4 (Remedies Upon Event of Default; Termination on Breach), 11.4 (Dissolution by Unilateral Option) or 11.5 (Dissolution Upon Notice) shall take place not later than the [***] Business Day after notice of the purchase is given, as the case may be, except that such period shall be extended as necessary in order to comply with any Governmental Rule. The purchasing Shareholder shall pay for the Shares being acquired by wire transfer of immediately available funds in Japanese Yen to an account specified by the selling Shareholder. The selling Shareholder shall execute all documents necessary to effect the conveyance of its Shares, free and clear of all Liens, to the purchasing Shareholder. In addition, the Shareholders shall enter into an indemnity and release agreement, in a form reasonably satisfactory to each Shareholder, indemnifying and holding harmless the selling Shareholder and its Affiliates for liabilities or claims made after the date of the purchase and sale under any guarantees or other agreements supporting the obligations of the Company which may have been extended by the selling Shareholder or any of its Affiliates. The Shareholders shall also reach agreement on a reasonable transition plan of up to six months in connection with services provided to the Company by members of the SanDisk Team assigned to the Company by the Selling Shareholder.

If a Shareholder elects to acquire all of the Shares of the other Shareholder pursuant to Section 10.3 (Dispute Resolution; Deadlock), 10.4 (Remedies Upon Event of Default; Termination on Breach), 11.4 (Dissolution by Unilateral Option) or 11.5 (Dissolution Upon Notice), such Shareholder shall be obligated to take all actions required of it to consummate the applicable purchase and sale on the date determined pursuant to this Section 10.5 (Mechanics of Sale). If any Shareholder has the right to purchase the Shares of any other Shareholder, such Shareholder shall have the right to assign such right to purchase to any other Person.

DISSOLUTION

Event of Dissolution. The Company shall be dissolved and shall commence winding up its affairs upon the first to occur of the following. The Shareholders shall cooperate in taking any necessary corporate steps under the Companies Act to attain the purpose of this Section 11:

the expiration of the term of the Company pursuant to Section 2.4 (Term; Extension);

the agreement of the Shareholders to dissolve the Company pursuant to Section 11.2 (Dissolution by Agreement);

the election of the Nondefaulting Shareholder pursuant to Section 11.3 (Dissolution Upon Event of Default);

the first anniversary of the receipt by either Shareholder of a Deadlock Dissolution Notice submitted with respect to a failure of the Shareholders to approve and agree upon a Business Plan pursuant to Section 10.3 (Dispute Resolution; Deadlock) if either (i) the Responding Shareholder declines to exercise its right to purchase the Shares of the Initiating Shareholder or fails to respond to such Deadlock Dissolution Notice, or (ii) both Shareholders submit Deadlock Dissolution Notices with respect to such failure to agree;

the election by Toshiba to dissolve the Company pursuant to Section 11.4 (Dissolution by Unilateral Option);

the bankruptcy, death, dissolution, expulsion or incapacity of a Shareholder or the occurrence of any other event which terminates the membership of a Shareholder in the Company (“Bankruptcy Event”); or

the election of the Notifying Party to dissolve the Company pursuant to Section 11.5 (Dissolution Upon Notice) unless the Notified Party elects to purchase the Shares of the Notifying Party pursuant to Section 11.5 (Dissolution Upon Notice).

Dissolution by Agreement. The Company may be dissolved at any time by the unanimous written consent of the Shareholders.

Dissolution Upon Event of Default. During the occurrence and continuation of an Event of Default (other than a Bankruptcy Event) with respect to a Shareholder, the Nondefaulting Shareholder may elect, by written notice to the Defaulting Shareholder, to dissolve the Company, in which event the Company shall be dissolved and the Shareholders shall take all actions necessary to wind up the affairs of the Company in accordance with Section 11.7 (Winding Up). This Section 11.3 shall not be construed to limit the rights of the Nondefaulting Shareholder under Section 10.4 (Remedies Upon Event of Default) or to seek damages from the Defaulting Shareholder or any other Person for the breach of its obligations under any of the FA Operative Documents.

Dissolution by Unilateral Option. At any time between April 1, 2009 and March 31, 2010, SanDisk may, by giving written notice to Toshiba, elect to withdraw from the Company, in which case Toshiba must, directly or through any of its Affiliates, either (i) purchase from SanDisk all of SanDisk’s Shares within one (1) year following SanDisk’s notice to withdraw for a cash payment, by wire transfer of immediately available Japanese Yen, in an amount equal to the [***] as of the FA Termination Date multiplied by SanDisk’s Percentage as of the Termination Date (the estimated [***] as of the Termination Date to be agreed by the Shareholders in good faith and any necessary true up payments promptly after the actual [***] as of the Termination Date is determined), or (ii) cooperate with SanDisk to dissolve the Company within one (1) year of the notice of withdrawal and to wind-up its affairs in accordance with Section 11.7 (Winding Up) (the

Dissolution upon Notice. At any time between April 1, 2013 and March 31, 2014, any Shareholder (the “Notifying Party”) may elect, by giving notice to all other Shareholders (the ‘‘Notified Party”), to dissolve the Company, in which event the Company will be dissolved and, within the one (1) year period following the giving of such notice, the Shareholders shall mutually agree upon a plan for winding up the affairs of the Company in accordance with Section 11.7 (Winding Up),·unless the Notified Party, directly or through any of its Affiliates, elects in writing within three (3) months of receiving such notice, to purchase from the Notifying Party all of its Shares for a cash payment, by wire transfer of immediately available Japanese Yen, in an amount equal to the [***] as of the date of such transaction multiplied by the Notifying Patty’s Percentage as of such date.

Financing Defaults.

If pursuant to Section 6.5(c)(i) of the Master Agreement either Party, as the Investing Party, exercises its election to terminate this Agreement, the Shareholders shall cooperate in good faith to effect the purchase by Toshiba (or its designated Affiliate) and sale by SanDisk of all of SanDisk’s Shares, at a price equal to SanDisk’s percentage share of the issued and outstanding Shares in the Company multiplied by the [***] as of the date such transaction is closed (with estimated [***] as agreed by the Shareholders in good faith paid on the closing of such transaction and any true-up payment made by the appropriate Party promptly after determination of the actual [***] as of the closing of such purchase and sale transaction).

[***]

If pursuant to Section 6.12(d)(ii) of the Master Agreement either Party, as the Non Defaulting Party, exercises its election to terminate this Agreement, the Non Defaulting Party shall have the same rights as provided in Section 1l.6(a) and the Shareholders shall cooperate in good faith to effect the purchase by the Non Defaulting Party (or its designated Affiliate) and sale by the Defaulting Patty of all of the Defaulting Party’s Shares.

Winding Up.

Upon the dissolution of the Company, the Shareholders shall proceed as promptly as practicable to (i) wind up the affairs of the Company and satisfy the Company’s liabilities, (ii) dispose of the Company’s assets as quickly as possible consistent with obtaining the :full fair market value of the Company, preferably, to the extent it is commercially practicable to do so, by selling the Company as a going concern (provided, however, no Shareholder shall be under any obligation to extend the terms of any FA Operative Document or to offer to enter into any other agreement with a prospective purchaser of the Company for the purchase or sale of goods or services or the use of facilities or any other business arrangement), and (iii) distribute any net proceeds to the Shareholders in accordance with Section 11.8 hereof and applicable Law. In connection with a sale of the Company’s assets under clause (ii), each Shareholder or any of their respective Affiliates shall have a right of first offer to acquire the Company’s tangible personal property in the liquidation process and may also acquire such property through participation at auction except in the event of a dissolution pursuant to Section 11.3 (Dissolution Upon Event of Default), in which event the Defaulting Shareholder and its Affiliates shall not have such

During the period of winding-up, the Company shall continue to operate and all the provisions of this Agreement shall remain in effect, except as otherwise expressly provided· herein. The Company shall notify all known creditors and claimants of the dissolution of the Company in accordance with applicable law.

In the case of the dissolution and liquidation of the Company, the Company may make a distribution in kind. Any cash and all distributions in kind that are to be distributed shall be distributed to the Shareholders, on a pro rata basis based upon the respective Percentages of the Shareholders as of the date of such distribution.

Unless otherwise agreed by the Shareholders, and to the extent permitted under any agreements with third parties, all assets to be distributed upon the dissolution and liquidation of the Company shall be distributed as follows:

first, to creditors, including Shareholders who are creditors, to the extent permitted by law, in satisfaction of liabilities of the Company, other than for distributions to Shareholders pursuant to Section 6.2 (Distributions); and

second, to the Shareholders on a pro rata basis based upon the respective Percentages of the Shareholders as of the date of such distribution.

Any distribution made pursuant to this Section 11.8 shall be made as soon as practicable under and in accordance with applicable Japanese law.

INDEMNIFICATION AND INSURANCE

Indemnification.

Subject to Section 12.1(c), the Company shall indemnify each Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including an action by or in the right of a Shareholder or the Company), by reason of the fact that such Person is or was a Shareholder or is or was or has agreed to become a Director or is or was serving or has agreed to serve at the request of the Company as a director, officer, employee or agent of the Company or of another partnership, corporation, joint venture, trust or other enterprise, arising from any action alleged to have been taken in any such capacity or by reason of any liability or obligation of the Company, against any and all losses, damages, liabilities, costs, charges, expenses (including interest, penalties and reasonable attorneys’ fees and expenses), judgments, fines and amounts paid in settlement (collectively, “Losses”) actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom. Without limiting the generality of the foregoing, any of such Losses shall be deemed to arise out of a Company liability or obligation if it arises out of or is based upon the conduct of the

The indemnification provided under this Section 12.1 shall inure to the benefit of the successors, heirs and personal representatives of any Person entitled to the benefit of such indemnification. Such indemnification shall be a contract right and shall include the right to be paid advances of reasonable expenses incurred by any such Person in connection with such action, suit or proceeding.

The indemnification provided under this Section 12.1 shall not inure to the benefit of any Person in respect of Losses to the extent that such Losses (i) arise out of or are based upon the gross negligence or willful misconduct of such Person or (ii) constitute a tax, levy or similar governmental charge not imposed upon the Company (or any of its Subsidiaries) or on their respective properties. The indemnification provided under this Section 12.1 shall also not be available to any Person in respect of any Losses if a judgment or other final adjudication adverse to such Person establishes (x) that such Person’s acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated or (y) that such Person gained in fact a financial profit or other advantage to which such Person was not legally entitled. It is understood and agreed that, for the purposes of this Section 12.1, Losses shall be deemed not to arise out of or be based upon the gross negligence or willful misconduct of a Person solely because it arises out of or is based upon the gross negligence, willful misconduct, bad faith or active and deliberate dishonesty of a director, officer or employee of such Person if at the time of such gross negligence, willful misconduct, bad faith or active and deliberate dishonesty, such director, officer or employee was also a member of the SanDisk Team or a Director acting in his capacity as such.

The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the indemnified Person did not meet the standard set forth in Section 12.l(c) (Indemnification).

Insurance. The Com any may, to the fullest extent permitted by law, purchased and maintain insurance against any liability that may be asserted against any Person entitled to indemnity pursuant to Section 12.1.

Indemnification by the Shareholders.

Each Shareholder agrees to, and does hereby, indemnify and hold harmless the Company and the other Shareholder from and against any and all Losses arising out of, or based upon, the gross negligence or willful misconduct of such Shareholder under this Agreement or such Shareholder exceeding its authority under this Agreement.

The provisions of this Section 12.3 shall survive each of the termination of this Agreement, the dissolution of the Company and the withdrawal of any Shareholder.

Assertion of Claims.

In the event that a Person (the “Indemnified Party”) desires to assert its right to indemnification from a Person (an “Indemnifying Party”) required to indemnify such Indemnified Party under this Section 12, the Indemnified Party will give the Indemnifying Party prompt notice of the claim giving rise thereto (a “Claim”), and the Indemnifying Party shall undertake the defense thereof (unless the Claim is asserted against or related to or results from any action or failure to take action by such Indemnifying Party). The