<PAGE>

                                                                    EXHIBIT 10.2

================================================================================

                   OPERATING AGREEMENT OF FLASH PARTNERS LTD.

                         Dated as of September 10, 2004

                                     between

                               TOSHIBA CORPORATION

                                       and

                          SANDISK INTERNATIONAL LIMITED

================================================================================

CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                    PAGE
<S>                                                                                 <C>
1.       DEFINITIONS, RULES OF CONSTRUCTION AND DOCUMENTARY CONVENTIONS.........      1

         1.1      Certain Definitions...........................................      1
         1.2      Additional Definitions........................................      1
         1.3      Rules of Construction and Documentary Conventions.............      2

2.       GENERAL PROVISIONS.....................................................      2

         2.1      Ownership of Units; Capital Increase..........................      2
         2.2      Name..........................................................      3
         2.3      Principal Office..............................................      3
         2.4      Term; Extension...............................................      3
         2.5      Scope of Activity.............................................      3
         2.6      Powers........................................................      3
         2.7      Articles of Incorporation.....................................      3
         2.8      Company Actions...............................................      3

3.       BUSINESS OPERATIONS....................................................      3

         3.1      Business Dealings with the Company............................      3
         3.2      Other Activities..............................................      4
         3.3      Personnel.....................................................      4
         3.4      Business Plans and Related Matters............................      6
         3.5      Standard of Care..............................................      7
         3.6      Use of Names..................................................      7

4.       ACTIONS BY THE UNITHOLDERS.............................................      7

         4.1      Matters Requiring the Approval of the Unitholders.............      8
         4.2      General Meetings of Unitholders...............................     10
         4.3      Restrictions on Unitholders...................................     10

5.       MANAGEMENT AND OPERATIONS OF COMPANY...................................     11

         5.1      Meetings of the Board of Directors............................     11
         5.2      Officers; Employees...........................................     16
         5.3      Y3 Representatives; Y3 Operating Committee....................     16
         5.4      Insurance.....................................................     17
         5.5      Records.......................................................     17

6.       CAPITAL CONTRIBUTIONS; DISTRIBUTIONS...................................     18

         6.1      Capital Contributions.........................................     18
         6.2      Distributions.................................................     18
</TABLE>

                                      -i-

<PAGE>

                                TABLE OF CONTENTS
                                  (continued)

<TABLE>
<CAPTION>
                                                                                    PAGE
<S>                                                                                 <C>
         6.3      No Interest...................................................     19
         6.4      Return of Capital Contributions...............................     19

7.       ADDITIONAL CONTRIBUTIONS...............................................     19

8.       ACCOUNTING AND TAXATION................................................     19

         8.1      Financial Accounting Conventions..............................     19
         8.2      Maintenance of Books of Account...............................     20
         8.3      Financial Statements..........................................     20
         8.4      Other Reports and Inspection..................................     22
         8.5      Characterization..............................................     22
         8.6      Deposit of Funds..............................................     22

9.       UNITS OF CONTRIBUTION; DISPOSITION OF UNITS............................     22

         9.1      Restrictions on Transfer of Units.............................     22
         9.2      Admission of New Unitholders..................................     24
         9.3      Withdrawal Prohibited.........................................     24
         9.4      Purchase of Additional Interest...............................     24

10.      CERTAIN AGREEMENTS OF THE UNITHOLDERS..................................     25

         10.1     Taxes and Charges; Governmental Rules.........................     25
         10.2     Further Assurances............................................     25
         10.3     Dispute Resolution; Deadlock..................................     25
         10.4     Remedies Upon Event of Default; Termination on Breach.........     27
         10.5     Mechanics of Sale.............................................     27

11.      DISSOLUTION............................................................     28

         11.1     Events of Dissolution.........................................     28
         11.2     Dissolution by Agreement......................................     28
         11.3     Dissolution Upon Event of Default.............................     28
         11.4     Dissolution by Unilateral Option..............................     29
         11.5     Dissolution upon Notice.......................................     29
         11.6     Financing Defaults............................................     29
         11.7     Winding Up....................................................     30
         11.8     Liquidation Proceeds..........................................     30

12.      INDEMNIFICATION AND INSURANCE..........................................     30

         12.1     Indemnification...............................................     30
         12.2     Insurance.....................................................     31
</TABLE>

                                      -ii-

<PAGE>

                                TABLE OF CONTENTS
                                  (continued)

<TABLE>
<CAPTION>
                                                                                    PAGE
<S>                                                                                 <C>
         12.3     Indemnification by the Unitholders............................     31
         12.4     Assertion of Claims...........................................     32

13.      MISCELLANEOUS..........................................................     32

         13.1     Governing Law.................................................     32
         13.2     Effectiveness.................................................     32
</TABLE>

EXHIBITS

Exhibit A         -    Articles of Incorporation of the Company

SCHEDULES

Schedule 2.1(b)   -    Committed Additional Capital Contributions
Schedule 5.3      -    Management and Operating Reports
Schedule 6.1      -    Capital Contributions
Schedule 8.3      -    Monthly Reports

                                     -iii-

<PAGE>

          OPERATING AGREEMENT of FLASH PARTNERS LTD., a Japanese limited
liability company (yugen kaisha), dated as of September 10, 2004, between
TOSHIBA CORPORATION, a Japanese corporation ("Toshiba"), and SANDISK
INTERNATIONAL LIMITED, a company organized under the laws of the Cayman Islands
( "SanDisk").

          WHEREAS, Flash Partners Ltd. (the "Company") is a Japanese limited
company (yugen kaisha);

          WHEREAS, pursuant to that certain Unit Purchase Agreement, dated as of
the date hereof, by and between SanDisk and Toshiba, concurrently with the
execution hereof, SanDisk has acquired from Toshiba 998 units par value Y5,000
per unit of contribution (shussi mochibun) in the Company ("Units"),
representing 49.9% of all issued and outstanding Units;

          WHEREAS, Toshiba holds the remaining 1,002 Units, representing 50.1%
of all issued and outstanding Units; and

          WHEREAS, SanDisk and Toshiba (each a "Unitholder") desire to enter
into this Operating Agreement in order to provide, subject to the Japan Act and
the Articles of Incorporation of the Company (as amended from time to time, the
"Articles") for (i) the business of the Company, (ii) the conduct of the
Company's affairs and (iii) the rights, powers, preferences, limitations and
responsibilities of the Company's Unitholders, employees and Directors.

          Accordingly, Toshiba and SanDisk agree as follows:

1.    DEFINITIONS, RULES OF CONSTRUCTION AND DOCUMENTARY CONVENTIONS

1.1   Certain Definitions.

(a)   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
      Partners Master Agreement, dated as of the date hereof, among SanDisk
      International Limited, SanDisk Corporation and Toshiba (the "Master
      Agreement") or in Appendix A to the Master Agreement.

(b)   As used herein, the term "Agreement" means this Operating Agreement
      together with any Exhibits, Schedules, Appendices and Attachments hereto.

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

                                       1

<PAGE>

<TABLE>
<CAPTION>
           Term                                      Defined in
           ----                                      ----------
<S>                                                <C>
"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 Unitholder"                            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 Unitholders"                   Section 4.1(b)
"Indemnified Party"                                Section 12.4(a)
"Indemnifying Party"                               Section 12.4(a)
"Initiating Unitholder"                            Section 10.3(e)
"Losses"                                           Section 12.1(a)
"Master Agreement"                                 Section 1.1(a)
"Nondefaulting Unitholder"                         Section 10.4
"Notified Party"                                   Section 11.5
"Notifying Party"                                  Section 11.5
"Permissible Assignee"                             Section 9.1(c)
"Permissible Assignment Agreement"                 Section 9.1(c)
"President"                                        Section 5.2(a)
"Responding Unitholder"                            Section 10.3(e)
"SanDisk Representative"                           Section 5.3(a)
"Termination Date"                                 Section 11.4
"Toshiba Representative"                           Section 5.3(a)
"Units"                                            Recitals
"Unitholder"                                       Recitals
"Y3 Operating Committee"                           Section 5.3(a)
</TABLE>

1.3   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.

                                       2

<PAGE>

2.    GENERAL PROVISIONS

2.1   Ownership of Units; Capital Increase.

(a)   The rights and obligations of the Unitholders shall be as set forth
      herein, subject to the Articles and mandatory provisions of the Japan Act.

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

2.2   Name. The name of the Company is "Flash Partners Yugen Kaisha," which
      translates to "Flash Partners Ltd." in English, and all Company business
      shall be conducted in that name or such other name as the Unitholders
      shall mutually agree.

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

2.4   Term; Extension. The Company shall be terminated on December 31, 2019,
      unless extended by mutual written agreement of all of the Unitholders or
      earlier terminated in accordance with Section 11 (Dissolution). Any such
      extension shall be effective only upon the written agreement of all of the
      Unitholders and shall be on such terms and for such period as set forth in
      such agreement. The Unitholders agree to meet, no later than December 31,
      2018, to discuss the possible extension of the term of the Company.

2.5   Scope of Activity. The scope of activity of the Company shall be as set
      forth in Section 3.1 (Purpose) and 6.5 (Capacity Sharing Arrangement) of
      the Master Agreement.

2.6   Powers. The Company shall have all the powers now or hereafter conferred
      by applicable law on limited liability companies formed under the Japan
      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).

2.7   Articles of Incorporation. On the date hereof and immediately following
      the execution of this Agreement, the Unitholders shall hold a general
      meeting of the Unitholders and, among other matters agreed between them,
      vote their Units 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 Unitholders confirm their intent that the terms of this
      Agreement shall prevail, and on the request of either Unitholder, the
      Unitholders 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 Unitholder from liability for any breach
      of its obligations hereunder.

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

                                       3

<PAGE>

3.    BUSINESS OPERATIONS

3.1   Business Dealings with the Company. Subject to Sections 4.1(a) (Matters
      Requiring the Approval of the Unitholders) 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 Unitholder 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 Unitholder or any of their respective Affiliates, subject to the
      Japan Act. The Unitholders 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
      Unitholder 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
      Unitholder or Affiliate to meet the Company's manufacturing requirements
      on competitive terms. Unless otherwise approved by the Unitholders or
      otherwise expressly provided in the FP Operative Documents, all business
      dealings of the Company with any Unitholder or any of their respective
      Affiliates shall be on the most beneficial standard commercial terms and
      conditions, including volume, price and credit terms, currently offered or
      made available to unaffiliated customers by such Unitholder or Affiliate,
      as the case may be, with respect to the products and services to be
      offered and provided to the Company.

3.2   Other Activities. The provisions of Section 6.11 (Other Activities) of the
      Master Agreement are hereby incorporated herein by reference.

3.3   Personnel. The provisions of Section 6.8 (FP Secondees) of the Master
      Agreement are hereby incorporated herein by reference.

3.4   Business Plans and Related Matters.

(a)   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 [***], will be agreed upon and certified
      by the Board of Directors as soon as practicable after the Closing.

      (i)   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.

      (ii)  An updated Business Plan complying with Section 3.4(b) (Form and
            Scope) in respect of each successive Fiscal Year after the Fiscal
            year ending [***] 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.

[***] INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

                                       4

<PAGE>

      (iii) 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
            5.1(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 Unitholder 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.

(b)   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 FP Operative Document.

(c)   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.

3.5   Standard of Care.

(a)   Each Unitholder, and each director of the Company, as defined in the Japan
      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:

[***] INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

                                       5

<PAGE>

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

      (ii)  legal counsel, public accountants or other Persons as to matters
            that such Unitholder or Director believes to be within such Person's
            professional or expert competence.

(b)   Each Unitholder 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.

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

4.    ACTIONS BY THE UNITHOLDERS

4.1   Matters Requiring the Approval of the Unitholders.

(a)   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
      Unitholders:

      (i)   any amendment, restatement or revocation of the Articles;

      (ii)  any amendment to or renewal of any FP Operative Document between the
            Company and any Unitholder or any of their respective Affiliates;

      (iii) any change in the scope of activity or strategic direction of the
            Company's business;

      (iv)  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;

      (v)   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 Y5,000,000 in one
            transaction or a series of related transactions, other than as
            expressly provided for in the FP Operative Documents or as set forth
            in the most recently approved Business Plan;

      (vi)  the approval of any transaction or agreement between the Company and
            any Unitholder or any of their respective Affiliates (other than
            transactions or agreements expressly provided for or authorized by
            an FP Operative Document or

                                       6

<PAGE>

            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 Y5,000,000 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;

      (vii) incurring Indebtedness in an amount in excess of Y1,000,000 or an
            increase in aggregate Indebtedness in excess of Y1,000,000 in any
            calendar quarter, other than as authorized by Section 5.1(d)
            (Matters Requiring the Approval of the Board of Directors);

     (viii) 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;

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

        (x) 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));

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

      (xii) the commitment of the Company to any development project;

     (xiii) the sale, license, assignment or other Transfer of any of the
            Company's intellectual property owned or in its possession
            (including any technology or know-how, whether or not patented, any
            trademark, trade name or service mark, any copyright or any software
            or other method or process);

                                       7

<PAGE>

      (xiv) any increase or decrease in the capital amount of the Company,
            whether by increasing the number of the Units or increasing the par
            value per Unit or otherwise; and

      (xv)  any other matter material to the operation, staffing, business or
            financial condition of the Company.

(b)   Each Unitholder may exercise its vote by proxy; provided, that such proxy
      shall submit to the Company, prior to the relevant General Meeting of
      Unitholders, as defined in the Japan Act (the "General Meeting of
      Unitholders"), a power of attorney duly signed by the Unitholder 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 Unitholders shall not be deemed to be a conferment of the power of
      proxy for any subsequent General Meeting of Unitholders.

(c)   Notwithstanding the requirements of Section 4.1(a) (Matters Requiring the
      Approval of the Unitholders) relating to agreements between the Company
      and any Unitholder 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 FP Operative Document between the Company and
      any Unitholder 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).

4.2   General Meetings of Unitholders.

(a)   An annual General Meeting of Unitholders 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 Unitholders 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 Japan Act or the Articles. All
      General Meetings of Unitholders shall be called and held in accordance
      with the Articles and the Japan Act. The General Meetings of Unitholders
      may be held at the Company's principal office or at any other location,
      or, if all the Unitholders agree, and to the extent then permitted by the
      Japan 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 Japan Act, the
      Unitholders may by unanimous written consent effect any resolution that
      could otherwise be resolved at a meeting of the Unitholders.

(b)   Except as otherwise provided in this Agreement, each Unitholder shall be
      entitled to one vote for each Unit owned by such Unitholder.

(c)   The minutes of every General Meeting of Unitholders shall be kept with the
      Company's records referred to in Section 5.5 (Records).

(d)   The quorum necessary for any General Meeting of Unitholders shall be those
      Persons entitled to cast all of the votes held by the Unitholders. A
      quorum shall be deemed not to

                                       8

<PAGE>

      be present at any meeting for which notice was not properly given under
      the Articles or the Japan Act, unless the Unitholder as to whom such
      notice was not properly given attends such meeting without protesting the
      lack of notice or duly executes and delivers a written waiver of notice or
      a written consent to the holding of such meeting.

4.3   Restrictions on Unitholders. No Unitholder may, without the prior written
      consent of the other Unitholder:

(a)   confess any judgment against the Company;

(b)   enter into any agreement on behalf of or otherwise purport to bind the
      other Unitholder or the Company;

(c)   do any act in contravention of this Agreement;

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

(e)   assign the property of the Company in trust for creditors or on the
      assignee's promise to pay any Indebtedness of the Company.

5.    MANAGEMENT AND OPERATIONS OF COMPANY

5.1   Meetings of the Board of Directors.

(a)   General. Except as otherwise provided herein, 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 (Y3 Operating
      Committee)).

(b)   Members of the Board of Directors; Voting; etc.

      (i)   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 Unitholders. Each Unitholder shall vote its
            Units to elect as Directors those persons nominated by the other
            Unitholder.

      (ii)  Directors shall be elected to serve until complete adjournment of
            the annual meeting of Unitholders 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.

      (iii) Subject to the fiduciary duty of Directors under the Japan Act, each
            Director shall serve at the pleasure of the designating Unitholder
            and may be removed as such,

                                       9

<PAGE>

            with or without cause, and his successor designated, by the
            designating Unitholder. Each Unitholder shall have the right to
            designate a replacement Director in the event of any vacancy among
            such Unitholder's appointees. Each Unitholder shall vote its Units
            in favor of any such removal and in favor of any such replacement
            Director.

      (iv)  Each Unitholder 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.

      (v)   Each Unitholder shall notify the other Unitholder and the Company of
            the name, business address and business telephone, e-mail address
            and facsimile numbers of each Director that such Member has
            nominated to the Board of Directors. Each Unitholder shall promptly
            notify the other Unitholder and the Company of any change in such
            Unitholder's nominated or of any change in any such address or
            number.

      (vi)  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 is required for
            valid action to be taken by the Board of Directors.

      (vii) 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.

     (viii) The quorum necessary for any meeting of the Board 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 5.1(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.

(c)   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.

      (i)   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.

                                       10

<PAGE>

      (ii)  Notice of any regular meeting or special meeting pursuant to Section
            5.1(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 5.1(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.

      (iii) 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 5.1(c)(ii); provided that the Directors
            appointed by the Unitholder that is not represented by the Director
            calling such special meeting shall be entitled to select a
            convenient location for the meeting and to suggest an alternative
            time or times if the designated time is not convenient for them. 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 any Unitholder or the Company.

      (iv)  Each Unitholder may invite a reasonable number of observers to all
            meetings of the Board of Directors.

      (v)   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.

      (vi)  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.

      (vii) Upon the consent of all Directors, a meeting 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

                                       11

<PAGE>

            meeting by conference telephone or similar communications equipment
            upon sufficient advance notice to permit arrangements therefor to be
            made.

     (viii) At each meeting, the Board of Directors shall consider (A) any of
            the items set forth in Section 5.1(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 Unitholder 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.

      (ix)  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 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 Board of
            Directors governance matters not inconsistent with the terms of this
            Agreement.

      (x)   Subject to the Japan 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.

(d)   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:

      (i)   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 Y1,000,000 in one
            transaction or a series of related transactions, other than as set
            forth in the most recently approved Business Plan;

      (ii)  the approval of any transaction or agreement between the Company and
            any Unitholder or any of their respective Affiliates (other than
            transactions or agreements expressly provided for or authorized by
            an FP 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 Y1,000,000 for any single transaction or agreement or for
            substantially identical transactions

                                       12

<PAGE>

            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;

      (iii) the purchase, lease, license or other acquisition of (A) personal
            property or services or (B) any list of capital equipment approved
            by the Unitholders, 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 Y1,000,000 in any one transaction or a series
            of related transactions, other than as provided for in the most
            recently approved Business Plan;

      (iv)  the selection of attorneys, accountants, auditors and financial
            advisors;

      (v)   the adoption of accounting and tax policies, procedures and
            principles;

      (vi)  incurring any Indebtedness;

      (vii) the hiring or termination of any employees referenced in Section
            5.2(a) (Officers; Employees) who are not FP Secondees, if any;

     (viii) 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;

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

      (x)   the amount and timing of any distributions;

      (xi)  the commencement or settlement of litigation by or against the
            Company;

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

     (xiii) any acquisition of securities or any other ownership interest in
            any entity;

      (xiv) 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;

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

      (xvi) 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;

                                       13

<PAGE>

     (xvii) 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;

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

      (xix) 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);

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

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

     (xxii) any dispute referred to the Board of Directors by the Y3 Operating
            Committee pursuant to Section 5.3(b); and

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

5.2   Officers; Employees.

(a)   Unless otherwise mutually agreed by the Unitholders, 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 ("Executive Vice
      President"). The President and Executive Vice President shall be elected
      by the Board of Directors and serve three successive one-year terms, with
      the first such set of terms ending at complete adjournment of the annual
      meeting of Unitholders for the fiscal year last to end within one (1) year
      after his or her assumption of the officership. Toshiba shall have the
      right to nominate the first President and SanDisk shall have the right to
      nominate the first Executive Vice President, and then the Unitholders will
      then alternate such nominating rights for each three year term for such
      positions. Each nominee for the President and for the Executive Vice
      President shall be subject to the consent of the non-nominating
      Unitholder, which consent shall not unreasonably be withheld. In addition
      to the President and Executive Vice President, the Board of Directors may
      appoint such other officers from time to time as it deems necessary or
      advisable in the conduct of the business and affairs of the Company. Any
      individual may hold more than one office.

                                       14

<PAGE>

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

(c)   The Company shall have agreements with and policies applicable to each of
      its officers, employees and consultants who are not FP Secondees, in forms
      acceptable to each Unitholder, and shall also have appropriate
      arrangements with its FP Secondees, 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 FP Secondees, non-competition.

5.3   Y3 Representatives; Y3 Operating Committee.

(a)   The Company shall have an Operating Committee for Y3 Facility operations
      (the "Y3 Operating Committee") consisting of the general manager of Y3
      Facility, who Toshiba shall cause to be the deputy general manager of the
      Yokkaichi Facility (the "Toshiba Representative"), and a SanDisk
      representative, who shall represent SanDisk on a day-to-day basis at the
      Y3 Facility (the "SanDisk Representative"). SanDisk and Toshiba shall each
      have the sole right to appoint the SanDisk Representative and the Toshiba
      Representative, respectively; provided that each Unitholder shall notify
      the other Unitholder in advance of any replacement of its representative.
      If a Unitholder requests in good faith that the other Unitholder's
      representative be replaced with another person from the other Unitholder's
      organization, the other Unitholder shall consider and discuss in good
      faith with the requesting Unitholder such request, provided that such
      replacement, if any, shall be determined solely by such other Unitholder.
      SanDisk shall pay for all expenses of the SanDisk Representative related
      to his or her activities at the Y3 Facility, including salaries and
      traveling expenses. The Company shall pay for all expenses of the Toshiba
      Representative related to his or her activities in connection with the Y3
      Operating Committee or otherwise at the Y3 Facility, subject to anything
      to the contrary in the accounting standards and methodologies in the
      Master Agreement.

(b)   The Y3 Operating Committee shall work together and endeavor to make the Y3
      Facility the most advanced and competitive memory fabrication facility in
      the world. The Y3 Operating Committee shall have the authority to
      determine all matters concerning the day-to-day operations of the Company
      and the Y3 Facility, subject to those matters reserved herein to the Board
      of Directors or the Unitholders as well as to the requirements of this
      Agreement, the Articles and the Japan Act. The Y3 Operating Committee
      shall communicate on a day-to-day basis with respect to the status of Y3
      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 Y3 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.

                                       15

<PAGE>

(c)   The Y3 Operating Committee shall hold a monthly review meeting in English
      at the Yokkaichi Facility on [***] of each calendar month, unless
      otherwise agreed by the Unitholders or the Y3 Operating Committee. The Y3
      Operating Committee shall prepare and distribute to each Unitholder (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 Y3 Facility.

(d)   Upon the request of either Unitholder, the Y3 Operating Committee shall
      provide the Unitholders with (i) any management or operation reports of
      the Company related to the Y3 Facility (which neither Unitholder 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.

5.4   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 Unitholders,
      and in any event as is generally maintained by companies engaged in a
      business similar to that of the Company.

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

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

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

(c)   a copy of this Agreement and all amendments hereto;

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

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

(f)   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 Y5,000,000 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;

(g)   a list of all contributions made to the Company by the Unitholders; and

[***] INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

                                       16

<PAGE>

(h)   a record of all distributions by the Company to each Unitholder.

The Unitholders and/or the Directors and/or their respective designees (which
shall be limited to its employees or professional advisers subject to
appropriate confidentiality obligations) shall have reasonable access to the
records during normal business hours upon reasonable request. Copies of records
shall be made available and delivered to the Unitholders and/or the Directors
promptly after reasonable request for same, provided the requesting party pays
for copy and delivery charges.

6.    CAPITAL CONTRIBUTIONS; DISTRIBUTIONS

6.1   Capital Contributions.

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

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

6.2   Distributions.

(a)   General. Notwithstanding any provision of the Articles to the contrary,
      and subject to Section 11.8 (Liquidation Proceeds), unless otherwise
      agreed by the Unitholders, no distributions of cash (or in the case of
      Section 11.8, other property) shall be made by the Company to the
      Unitholders 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 Unitholders 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 Unitholders shall be made on a pro rata basis based upon the
      respective Percentages of the Unitholders as of the date of such
      distribution.

(b)   Distribution for Taxes. Notwithstanding Section 6.2(a), subject to the
      Japan 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'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 Japan Act. Simultaneously therewith, the
      Company shall also make a distribution to Toshiba in an amount equal to
      the amount of the per Unit 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 Units under Section 10 (Certain

                                       17

<PAGE>

      Agreements of the Unitholders) 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 Y3 Facility's operations.

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

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

7.    ADDITIONAL CONTRIBUTIONS

      No Unitholder shall be obligated under this Agreement or the Articles to
      contribute any additional amounts to the Company or otherwise to be liable
      for the debts and obligations of the Company.

8.    ACCOUNTING AND TAXATION

8.1   Financial Accounting Conventions.

(a)   The Company shall adopt and follow Japanese GAAP.

(b)   Notwithstanding anything to the contrary in Appendix A, the first Fiscal
      Year shall begin on April 1, 2004 and end on March 31, 2005.

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

8.2   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 Unitholders to account for their interest in the Company
      in accordance with Japanese GAAP.

8.3   Financial Statements.

(a)   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
      Unitholder 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 Unitholders' 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

                                       18

<PAGE>

      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 Unitholder 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 Unitholder 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.

(b)   Quarterly Statements.

      (i)   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
            Unitholder and each Director unaudited consolidated and
            consolidating balance sheets of the Company as of the end of such
            Fiscal Quarter and the related unaudited consolidated and
            consolidating statements of operations, the Unitholders' capital
            accounts and cash flows of the Company for such Fiscal Quarter and
            for the Fiscal Year to date (or similar statements if such
            statements change as the result of changes in Japanese GAAP), in
            each case setting forth in comparative form the corresponding
            figures for the preceding Fiscal Quarter, for the corresponding
            Fiscal Quarter of the preceding Fiscal Year and for the budget for
            the Fiscal Quarter just completed and for the Fiscal Year to date.

      (ii)  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.

                                       19

<PAGE>

(c)   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'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.

(d)   Monthly Reports. Each month, the Company shall prepare and deliver to each
      Unitholder 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.

(e)   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 Unitholder a copy of the
      Business Plan, including the Company's monthly budgets, for the upcoming
      Fiscal Year, as approved by the Board of Directors.

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

8.4   Other Reports and Inspection. The Company shall furnish promptly to each
      Unitholder such other reports, financial data and information relating to
      the Company as such Unitholder may reasonably request and shall require
      the Accountants to provide to each Unitholder copies of any document
      related to the Company in the possession of the Accountants as such
      Unitholder may reasonably request. The Company shall, upon reasonable
      prior notice and during normal business hours, make available to each
      Unitholder and their respective professional advisors, from time to time
      as requested by such Unitholder, all properties, assets, books of account,
      corporate records, contracts and documentation, if any, relating to
      employee benefits of the Company, and any other material requested by such
      Unitholder for inspection and, in the case of books of account, corporate
      records, contracts and documentation, if any, relating to employee
      benefits, copying, and shall use reasonable efforts to make available to
      such Unitholder the Accountants and the key employees of the Company for
      interviews to verify any information furnished or to enable such
      Unitholder otherwise to review the Company and its operations. The Company
      may condition such availability upon the entering into of reasonable and
      appropriate confidentiality agreements. Notwithstanding the foregoing, the
      Company will not make available to any Unitholder information provided to
      the Company on a confidential basis by any other Unitholder without the
      consent of such other Unitholder.

[***] INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
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8.5   Characterization. For the purposes of US federal, state and local income
      and franchise taxation, the Unitholders intend that the Company shall be
      treated as a partnership at all times, and shall take all actions,
      including the execution of other documents required to be filed by the
      Code, as may be reasonably required to qualify for and receive treatment
      as a disregarded entity and as a partnership, as the case may be, for such
      US tax purposes. SanDisk shall bear all costs and expenses incurred by the
      Company or any Unitholder in connection with any action required to be
      taken pursuant to this Section. Notwithstanding the foregoing, the Company
      shall have no obligation to take any action under this Section that would
      have an adverse effect on it or any Unitholder under any Japanese
      Governmental Rule.

8.6   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 Unitholder or any of their respective
      Affiliates.

9.    UNITS OF CONTRIBUTION; DISPOSITION OF UNITS

9.1   Restrictions on Transfer of Units.

(a)   No Unitholder (nor any permitted transferees of any Unitholder) may
      Transfer any interest in the Company, including any of such Unitholder's
      Units, to any Person, except by a Change of Control; provided, that any
      Unitholder may Transfer all of its interest in the Company, including all
      of its Units, to any one (1) of their respective Affiliates, with the
      prior written consent of every other Unitholder, 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 Unitholder hereunder and under each other FP Operative
      Document to which the transferring Unitholder 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 Unitholder and
      such Unitholder 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
      Unitholder shall exist. Following the effectiveness of any such Transfer,
      the transferring Unitholder 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 Unitholder for all purposes of
      this Agreement. The transferring Unitholder shall, however, remain
      responsible for all obligations under this Agreement and the other FP
      Operative Documents for any transferee which is an Affiliate of the
      transferring Unitholder 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 Unitholder
      shall be deemed to constitute a Transfer of Units requiring compliance
      with this Section 9.1.

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(b)   If a Unitholder 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 Unitholder under this Agreement.

(c)   Any Unitholder may agree to pay amounts equal to distributions received by
      such Unitholder from the Company to a third party in its sole discretion
      pursuant to a Permissible Assignment Agreement. "Permissible Assignment
      Agreement" means an agreement between a Unitholder and another Person (the
      "Permissible Assignee") which:

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

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

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

      (iv)  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 Unitholder;

      (v)   provides that the assigning Unitholder 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

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

      The assigning Unitholder 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.

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

(a)   except in the case of a Transfer of all of a Unitholder's Units to an
      Affiliate of such Unitholder in accordance with Section 9.1(a)
      (Restrictions on Transfer of Units), such Person, the terms and conditions
      of such Person's admission as a Unitholder and the

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      rights appurtenant to the Units to be issued or Transferred, as
      applicable, to such Person are approved by all existing Unitholders and,
      if applicable, the creation of any new class or group of Units in the
      Company having different rights, powers and duties is reflected in
      amendments to the Articles and to this Agreement;

(b)   such Person executes a counterpart of this Agreement and such other
      instrument or instruments as the Company and a non-transferring Unitholder
      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
      Unitholder by this Agreement and all of the covenants and agreements
      herein; and

(c)   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
      Units to the new Unitholder will comply with the Japan Act.

      Except to the extent required by law, the Company shall have no obligation
      to recognize or to furnish information or make distributions to any new
      Unitholder or any transferee of a Unitholder who does not become a
      Unitholder in accordance with Section 9.1 (Restrictions on Transfer of
      Units) or this Section 9.2.

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

9.4   Purchase of Additional Interest. At any time during the term of this
      Agreement and so long as SanDisk is a Unitholder, SanDisk shall have the
      right to purchase from Toshiba that number of Units which is equal to 0.1%
      of the total number of Units 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 Units shall equal 0.1% of the Company's
      Net Book Value as of the date of such transaction.

10.   CERTAIN AGREEMENTS OF THE UNITHOLDERS

10.1  Taxes and Charges; Governmental Rules. Each Unitholder shall (a) promptly
      pay all applicable Taxes and other governmental charges imposed against
      such Unitholder 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.

10.2  Further Assurances. Following the Closing, each Unitholder 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

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<PAGE>

      with the other Unitholder 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 Unitholder or any of
      its Affiliates in connection therewith.

10.3  Dispute Resolution; Deadlock.

(a)   The Unitholders 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 Board
      of Directors approval pursuant to Section 5.1(d) (Matters Requiring the
      Approval of the Board of Directors). The Unitholders 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.

(b)   If (i) the Unitholders are unable to agree on any matter requiring the
      approval of the Unitholders pursuant to Section 4.1(a) (Matters Requiring
      the Approval of the Unitholders), (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 Approval of the Board of
      Directors) (other than the approval of any Business Plan, with respect to
      which the failure to agree shall be governed by Sections 10.3(c), (e) and
      (f)) or (iii) the Unitholders or the Board of Directors are otherwise
      unable to resolve a dispute on any other item (other than the approval of
      any Business Plan, with respect to which the failure to agree shall be
      governed by Sections 10.3(c), (e) and (f)), then any Unitholder may bring
      the matter to the attention of the General Manager Memory Division,
      Semiconductor Company of Toshiba, and the Chief Operating Officer of
      SanDisk (the "Designated Individuals"), who will attempt to find a
      resolution. If the matter has not been resolved within thirty (30) days of
      referral to the Designated Individuals, the matter will be referred to the
      Management Committee for a final decision, which decision will be final
      and binding on the Company and the Unitholders with respect to any matter
      specified in Sections 10.3(b)(i) and (ii) above. If an agreement is
      reached by the Management Committee, the mutually agreed resolution shall
      be implemented by the Company. Should no solution be agreed upon within
      thirty (30) days after submission of the matter to the Management
      Committee with respect to the matters specified in (iii) above, such
      matter shall be submitted to arbitration in accordance with Section 2.5 of
      the Appendix A. Should no solution be agreed upon within sixty (60) days
      after submission of the matter to the Management Committee with respect to
      the matters specified in Sections 10.3(b)(i) and (ii) above, then the
      action for which approval was requested will not occur, unless it is
      already included in the most recently approved Business Plan.

(c)   Except as provided below, if by [***] of any calendar year during the term
      of this Agreement, commencing [***], the Board of Directors and the
      Unitholders have not approved and agreed upon a Business Plan for the
      upcoming Fiscal Year, then any Unitholder may refer the dispute to the
      Management Committee for a decision, which

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      decision shall be final and binding on the Company and the Unitholders. 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 Unitholders 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 Unitholder may elect by written notice to all other Unitholders to
      declare a deadlock ("Deadlock"), except with respect to any issue where
      the Master Agreement expressly prohibits declaration of a Deadlock.

(d)   If demand for both Unitholder's NAND Flash Memory Products is
      significantly below expectations, they shall address the matter as
      contemplated in Section 6.5(b)(ii) of the Master Agreement.

(e)   Within thirty (30) days after a Unitholder has notified the other
      Unitholder of a Deadlock, either Unitholder (the "Initiating Unitholder")
      may submit to the other Unitholder (the "Responding Unitholder") a written
      irrevocable notice (the "Deadlock Dissolution Notice") to the effect that
      the Initiating Unitholder offers to sell to the Responding Unitholder or
      its designee the Initiating Unitholder's Units 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
      Unitholder's Percentage as of such date.

(f)   The Responding Unitholder may accept such offer by written response to the
      Initiating Unitholder within forty-five (45) days of receipt of the
      Deadlock Dissolution Notice indicating that the Responding Unitholder
      elects to purchase the Units of the Initiating Unitholder. If the
      Responding Unitholder declines to exercise its right to purchase the Units
      of the Initiating Unitholder pursuant to this Section 10.3 or fails to
      respond to such Deadlock Dissolution Notice (or if both Unitholders submit
      Deadlock Dissolution Notices), the Company shall be dissolved pursuant to
      Section 11.1(d) (Events of Dissolution), at the end of a one-year period
      for the wind-down of operations commencing with the receipt of the
      Deadlock Dissolution Notice by the Responding Unitholder. During such
      one-year period, the Company's business shall be conducted in accordance
      with the most recently approved Business Plan except that additional
      capital expenditures will not be made except as required for line
      maintenance.

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

(a)   give written notice to the Defaulting Unitholder of its intention to
      acquire all of the Units of the Defaulting Unitholder for a cash payment,
      by wire transfer of immediately available Japanese Yen, in an amount equal
      to the [***] of the Company as of the date of

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      such transaction multiplied by the Defaulting Unitholder's Percentage as
      of such date; and/or

(b)   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).

10.5  Mechanics of Sale.

(a)   The closing of any purchase and sale of Units 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 Unitholder shall pay for the
      Units being acquired by wire transfer of immediately available funds in
      Japanese Yen to an account specified by the selling Unitholder. The
      selling Unitholder shall execute all documents necessary to effect the
      conveyance of its Units, free and clear of all Liens, to the purchasing
      Unitholder. In addition, the Unitholders shall enter into an indemnity and
      release agreement, in a form reasonably satisfactory to each Unitholder,
      indemnifying and holding harmless the selling Unitholder 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
      Unitholder or any of its Affiliates. The Unitholders shall also reach
      agreement on a reasonable transition plan of up to six months in
      connection with services provided to the Company by FP Secondees assigned
      to the Company by the Selling Unitholder.

(b)   If a Unitholder elects to acquire all of the Units of the other Unitholder
      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 Unitholder
      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 Unitholder has the right to
      purchase the Units of any other Unitholder, such Unitholder shall have the
      right to assign such right to purchase to any other Person.

11.   DISSOLUTION

11.1  Events of Dissolution. The Company shall be dissolved and shall commence
      winding up its affairs upon the first to occur of the following:

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

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

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

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

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

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

(g)   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 Units of the Notifying Party pursuant to Section 11.5
      (Dissolution Upon Notice).

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

11.3  Dissolution Upon Event of Default. During the occurrence and continuation
      of an Event of Default (other than a Bankruptcy Event) with respect to a
      Unitholder, the Nondefaulting Unitholder may elect, by written notice to
      the Defaulting Unitholder, to dissolve the Company, in which event the
      Company shall be dissolved and the Unitholders 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 Unitholder under Section 10.4 (Remedies Upon
      Event of Default) or to seek damages from the Defaulting Unitholder or any
      other Person for the breach of its obligations under any of the FP
      Operative Documents.

11.4  Dissolution by Unilateral Option. At any time between April 1, 2007 and
      March 31, 2008, 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 Units 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 [***] of the Company as of the FP Termination Date multiplied by
      SanDisk's Percentage as of the Termination Date (the estimated [***] of
      the Company as of the Termination Date to be agreed by the Unitholders in
      good faith and any necessary true up payments promptly after the actual
      [***] of the Company 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 date as of which any Unitholder, itself

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      or together with its Affiliates, holds all Units of the Company or the
      date the Company is dissolved in accordance with applicable Law, the
      "Termination Date," but in no event shall the Termination Date occur later
      than one (1) year following SanDisk's notice to withdraw).

11.5  Dissolution upon Notice. At any time between April 1, 2011 and March 31,
      2012, any Unitholder (the "Notifying Party") may elect, by giving notice
      to all other Unitholders (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 Unitholders 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
      Units for a cash payment, by wire transfer of immediately available
      Japanese Yen, in an amount equal to the [***] of the Company as of the
      date of such transaction multiplied by the Notifying Party's Percentage as
      of such date.

11.6  Financing Defaults.

(a)   If pursuant to Section 6.3(c)(i) of the Master Agreement either Party, as
      the Investing Party, exercises its election to terminate this Agreement,
      the Unitholders shall cooperate in good faith to effect the purchase by
      Toshiba (or its designated Affiliate) and sale by SanDisk of all of
      SanDisk's Units, at a price equal to SanDisk's percentage share of the
      issued and outstanding Units in the Company multiplied by the [***] of the
      Company as of the date such transaction is closed (with estimated [***] as
      agreed by the Unitholders 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 [***] of the Company as of the closing
      of such purchase and sale transaction).

(b)   [***]

(c)   If pursuant to Section 6.10(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 11.6(a) and the Unitholders shall cooperate in good faith to
      effect the purchase by the Non-Defaulting Party (or its designated
      Affiliate) and sale by the Defaulting Party of all of the Defaulting
      Party's Units.

11.7  Winding Up.

(a)   Upon the dissolution of the Company, the Unitholders 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
      Unitholder shall be under any obligation to extend the terms of any FP
      Operative Document or to offer to enter into any other agreement with a
      prospective

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      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 Unitholders in accordance with Section
      11.8 hereof and applicable Law. In connection with a sale of the Company's
      assets under clause (ii), each Unitholder 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 Unitholder and its Affiliates shall not have
      such right of first offer to acquire the Company's tangible personal
      property. Each of the Unitholders shall be furnished with a statement
      setting forth the assets and liabilities of the Company as of the date of
      the complete liquidation of the Company. The Accountants shall review the
      final accounting and shall render their opinion with respect thereto.

(b)   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.

11.8  Liquidation Proceeds.

(a)   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 Unitholders, on a
      pro rata basis based upon the respective Percentages of the Unitholders as
      of the date of such distribution.

(b)   Unless otherwise agreed by the Unitholders, 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:

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

      (ii)  second, to the Unitholders on a pro rata basis based upon the
            respective Percentages of the Unitholders as of the date of such
            distribution.

For purposes of this Section 11.8, instruments of transfer and other documents
reasonably requested by the distributee shall be executed by the Company or the
other Unitholder, or both.

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

12.   INDEMNIFICATION AND INSURANCE

12.1  Indemnification.

                                       29
<PAGE>

(a)   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 Unitholder or the Company), by reason of the fact that such Person is or
      was a Unitholder 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 business of the Company (or any of
      its Subsidiaries) or the ownership of the property of the Company (or any
      of its Subsidiaries).

(b)   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.

(c)   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 FP Secondee or a
      Director acting in his capacity as such.

(d)   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 12.1(c) (Indemnification).

                                       30
<PAGE>

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

12.3  Indemnification by the Unitholders.

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

(b)   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 Unitholder.

12.4  Assertion of Claims.

(a)   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 failure to promptly notify the Indemnifying Party hereunder
      shall not relieve the Indemnifying Party of its obligations hereunder,
      except to the extent that the Indemnifying Party is actually prejudiced by
      the failure to so notify promptly.

(b)   The Indemnified Party shall not settle or compromise any Claim without the
      written consent of the Indemnifying Party unless the Indemnified Party
      agrees in writing to forego any and all claims for indemnification from
      the Indemnifying Party with respect to such Claim. However, if the
      Indemnifying Party, within a reasonable time after notice of any such
      Claim, fails to defend such Claim, the Indemnified Party shall have the
      right to undertake the defense, compromise or settlement of such Claim on
      behalf of and for the account and risk of the Indemnifying Party, subject
      to the right of the Indemnifying Party to assume the defense of such Claim
      at any time prior to settlement, compromise or final determination
      thereof.

(c)   If the Indemnifying Party has undertaken the defense of a Claim and (i) if
      there is a reasonable expectation that (x) a Claim may materially and
      adversely affect the Indemnified Party other than as a result of money
      damages or other money payments or (y) the Indemnified Party or
      Unitholders may have legal defenses available to it or them that are
      different from or additional to the defenses available to the Indemnifying
      Party, or (ii) if the Indemnifying Party shall not have employed counsel
      reasonably satisfactory to the Indemnified Party, the Indemnified Party
      shall nevertheless have the right, at the Indemnifying Party's cost and
      expense, to defend such Claim.

                                       31
<PAGE>

13.   MISCELLANEOUS

13.1  Governing Law. Notwithstanding anything to the contrary in Appendix A,
      this Agreement shall in all respects be governed by and construed in
      accordance with the laws of Japan, without regard to the conflict of laws
      principles.

13.2  Effectiveness. This Agreement shall be effective as of the date first
      written above and shall remain in effect until the Termination Date.
      Sections 7, 11.7, 11.8 and 13 shall survive the Termination Date.

                     [REST OF PAGE INTENTIONALLY LEFT BLANK]

                                       32
<PAGE>

            IN WITNESS WHEREOF, this Agreement has been executed and delivered
by each party as of the date first above written.

                                        TOSHIBA CORPORATION

                                        By:   /s/ Masashi Muromachi
                                           -------------------------------------
                                           Name:    Masashi Muromachi
                                           Title:   President and CEO
                                                    Semiconductor Company
                                                    Corporate Vice President

                                        SANDISK INTERNATIONAL LIMITED

                                        By:   /s/ Eli Harari
                                           -------------------------------------
                                           Name:    Eli Harari
                                           Title:   President

[Signature Page to Flash Partners Operating Agreement]

                                       33
<PAGE>

                                    EXHIBIT A

                    ARTICLES OF INCORPORATION OF THE COMPANY

[***]

[***] INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

                                       34
<PAGE>

                         Unofficial English Translation

                            ARTICLES OF INCORPORATION
                                       OF
                              FLASH PARTNERS, LTD.

[***]

[***] INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

                                       35
<PAGE>

                                 Schedule 2.1(b)

                   Committed Additional Capital Contributions

[***]

[***] INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

                                       36
<PAGE>

                                  Schedule 5.3

                        Management and Operating Reports

[***]

[***] INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

                                       37
<PAGE>

                                  Schedule 6.1

                              Capital Contributions

[***]

[***] INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24B-2. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

                                       38
<PAGE>

                                  Schedule 8.3

                                 Monthly Reports

This Schedule provides a list of Unitholder required reports, pursuant to
Section 8.3(d) (Monthly Reports), that are required to be transmitted to the
Unitholders by the dates listed. Any Unitholder may modify this list
periodically as requirements for data change. When a Unitholder requests a
report, a sample format for the report will be provided to the Company by the
requesting Unitholder.

REPORTS TO UNITHOLDERS

<TABLE>
<CAPTION>
              REPORT TITLE                                    DATE DUE
<S>                                                   <C>
A.   Monthly Flash Report                             3 days after month close
B.   Monthly Measurement Report                       7 days after month close
C.   Monthly Cash Flow Report                         7 days after month close
D    Monthly Balance sheets                           7 days after month close
E.   Monthly Profit & Loss                            7 days after month close
F.   Monthly Operational Spending Summary             7 days after month close
</TABLE>

                                       39