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Table of Contents
 PageArticle 1 (Definitions)
    
    
    1Article 2 (Transaction Structure)
    
    
    10Article 3 (Lease)
    
    
    10Article 4 (Delivery)
    
    
    10Article 5 (Prior conditions regarding delivery)
    
    
    11Article 6 (Related documents)
    
    
    12Article 7 (Payment of lease payment etc.)
    
    
    13Article 8 (Immunity from defect liability)
    
    
    15Article 9 (Burden of loss, damage and risk)
    
    
    16Article 10 (Representation of Owner)
    
    
    18Article 11 (Quiet Enjoyment)
    
    
    18Article 12 (Installation and Use)
    
    
    18Article 13 (Possession and Sublease)
    
    
    18Article 14 (Maintenance Management)
    
    
    19Article 15 (Change in Original Condition)
    
    
    19Article 16 (Ownership of Parts)
    
    
    20Article 17 (Inspection)
    
    
    20Article 18 (Obligations)
    
    
    20Article 19 (Insurance)
    
    
    21Article 20 (Representations and Warranties)
    
    
    21Article 21 (Covenants)
    
    
    23Article 22 (Indemnity and Expenses Liabilities)
    
    
    24Article 23 (Number of individual transactions and change of deliverable period)
    
    
    26Article 24 (Purchase Options)
    
    
    26Article 25 (Return)
    
    
    27Article 26 (Termination of Agreement)
    
    
    29Article 27 (Default Interest)
    
    
    32Article 28 (Transfer of Rights and Obligations)
    
    
    32Article 29 (Limitations on Recourse to the Property)
    
    
    33Article 30 (Notices, etc.)
    
    
    35Article 31 (Modification of Agreement)
    
    
    35Article 32 (Confidentiality)
    
    
    35Article 33 (Governing Law)
    
    
    36Article 34 (Jurisdiction)
    
    
    36




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1
    
    Unless the context makes it clear that the term has a different meaning, the terms
in the left column below, used in this Agreement, shall have the meanings set forth in
the right column below, corresponding to the relevant terms.
 SD Group Companies
    
    San Disk Corporation and companies of which San
Disk Corporation directly or indirectly owns 50%
or more of their voting stocksSD Lessor RA
    
    Pursuant to the assignment provided in Article 4
of All Parties Agreement, Sumisho Lease Co.,
Ltd., at the time of return, sale and other
forms of disposition of Subject Property
(hereinafter, the Property), acting on behalf
of the SD Lessors with respect to the SD
Lessors interest, or acting on behalf of the SD
Lender with respect to the Property or the SD
Lessors interest.Reason for cancellation
    
    Any of all of the reasons stipulated in Article
26, Paragraph 1Loan certificate
    
    Loan certificate for the Property prepared for
each individual transaction in a manner provided
in Attachment 2 pursuant to Article 4,
Paragraph 5Stipulated loss payment
    
    Amount calculated for each Tranche on a certain
day in accordance with Attachment 1, Paragraph 9




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Taxes and public dues
    
    Present or future tax, levy, withholding tax,
fees, handling fees, monetary obligations as
well as other monies (regardless of their names)
and penalties, default assessments, surcharges,
late charges and late interest thereon
(regardless of their names) imposed by a tax
authority or public office (both domestic and
foreign)Bank Business Day
    
    Days on which banks operate in JapanPayment for exercise of
purchase options
    
    Amount calculated pursuant to
Attachment 1, Paragraph 6 with respect to each Tranche for
each lease payment dateIndividual transaction
    
    Each individual transaction to be conducted
pursuant to this Agreement and each loan
certificateOriginal Purchase
Agreement
    
    Each purchase agreement executed
between Lessee and a property manufacturer in connection with
the purchase of the PropertySublessee
    
    Person who holds a sublease pursuant to the
stipulation in Article 13Repayment standard fee
    
    Amount calculated pursuant to Attachment 1,
Paragraph 8 for the return date stipulated in
Article 25, Paragraph 1Performance, etc.
    
    Performance, structure, design, design
specification, practical value, exchange value,
usability, sales possibility, commercial value,
durability, operability, economical efficiency,
compatibility with purpose, legality and any
other performance, function, characteristics,
value and utility of the PropertyReason for total loss
    
    Any of the following incidents that occur to the
Property or its unit component or component
part: (a) Loss or whereabouts unknown (b)
damage or failure, reasonably recognized by
Lessee as impossible to repair or reuse from an
economic viewpoint, which is confirmed by an
appraisal company appointed by Lessor or (c)
confiscation, expropriation or theft
 - 2 -




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Loss, etc.
    
    Losses, damage, costs, fees, handling fees,
liabilities, responsibilities, penal charges,
penalties, delinquency charges, claims and
lawsuitsUnit component part
    
    A set of each property (including subject parts
fixed to or furnished with said property) listed
separately in each loan certificate of the
Property. Provided, however, that when a part or
unit component part subject to said individual
transaction is excluded from this Agreement, the
remaining unit component part/s shall compose
unit component parts subject to the said
individual transaction thereafter.Bankruptcy proceedings,
etc.
    
    General term referring to
bankruptcy, civil rehabilitation or corporate reorganizations and
other bankruptcy proceedingsToshiba Lessor RA
    
    Pursuant to Article 4 of All Parties Agreement,
at the time of return, sale and other forms of
disposition of the Property, Sumisho Lease Co.,
Ltd. acting on behalf of Toshiba Lessor with
respect to Toshiba Lessors interest, or acting
on behalf of the SD Lender with respect to the
Property or the SD Lessors interest.Toshiba group
companies
    
    Toshiba Corporation and companies
of which Toshiba Corporation directly or indirectly owns
50% or more of their voting sharesTranche
    
    Collective term for SD Tranche 1, SD Tranche 2,
Toshiba Tranche 1 and Toshiba Tranche 2, which
are structured pursuant to Article 7, Paragraph
1 in regard to lease payments or other
receivables under this AgreementDelivery period
    
    Period from the day of the execution of this
Agreement to the final deliverable date
stipulated in Attachment 1, Paragraph 1
 - 3 -




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Delivery place
    
    Place, on each scheduled delivery day, where
the Property or its unit component part is
located, which the Lessee notifies the Lessor on
a Banking Business Day immediately prior to the
relevant scheduled delivery dayDelivery date
    
    Date on which each unit component part composing
the Property is delivered pursuant to Article 4Scheduled delivery date
    
    Each day stipulated in Attachment 1, Paragraph 1
as a scheduled delivery date for each individual
transaction or other bank business day during
the delivery period agreed upon by Lessee and
LessorPerson to be compensated
    
    Lessor, the Borrower, or the Lender and all or
either of successor, director, employee or
agent thereofObligation etc.
    
    Ownership, right of possession, lease right,
lease, mortgage, right of pledge, lien, security
interests, right of mortgage and conditional
rights thereto, subscription rights thereto, any
other usufructuary right as well as security
rights and rights based on attachment or
provisional attachmentProperty purchase price
    
    Sales price determined by Article 3, Paragraph 1
of the Master Sale and Purchase Agreement with
respect to the Property or its each unit
component partProperty manufacturer
    
    Person indicated in the column manufacturer
on an itemized property list attached to a loan
certificateCause of default
    
    Cause of cancellation or cancellation by
notification or cause of cancellation as a
result of passing of time or other conditions
 - 4 -




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Break funding cost
    
    Damages or expense borne by each Lessor with
respect to raising funds for purchasing the
Property upon nonperformance or early
termination of a lease, pursuant to this
Agreement. The cost shall be calculated as
damage cost, penalty or other monies (provided,
however, that if Lessee has doubts about other
monies, Lessor, Lessee and the Lender shall
negotiate) imposed by the Lender on the
Borrower pursuant to the Loan Agreements with
respect to nonperformance of loans or
prepayment, etc.Return Adjustment Fee
    
    Amount to be calculated pursuant to Attachment
1, Paragraph 7 with respect to the return date
stipulated in Article 25, Paragraph 1The Lenders
    
    Collective term for the SD Lenders and Toshiba
Lenders.The SD Lenders
    
    Collective term for persons listed as the SD
Lenders in Attachment 1, Paragraph 11The Toshiba Lenders
    
    Collective term for persons listed as the
Toshiba Lenders in Attachment 1, Paragraph 11The Loan Agreements
    
    Collective term for the SD Loan Agreement and
the Toshiba Loan AgreementThe SD Loan Agreement
    
    Collective term for Revolving Loan Agreement (SD
Tranche 1) concluded between the SD Borrower and
the SD Lender on the same date as the execution
of this Agreement and its Acknowledgement of
Debts and Repayment Agreement thereunder.The Toshiba Loan
Agreement
    
    Collective term for Revolving Loan Agreement
(Toshiba Tranche 1) concluded between the
Toshiba Borrower and the Toshiba Lender on the
same date as the execution of this Agreement and its Acknowledgment of Debts and Repayment
Agreement thereunder.The Borrowers
    
    Collective term for the SD Borrower and the
Toshiba Borrower.
 - 5 -




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The SD Borrower
    
    Person/s listed as SD Borrower in Attachment 1,
Paragraph 12The Toshiba Borrower
    
    Person/s listed as Toshiba Borrower in
Attachment 1, Paragraph 12All Parties Agreement
    
    Agreement setting forth priority executed by the
Lenders, Lessor and the Borrowers on the same
date as this AgreementRelated Agreements
    
    This Agreement, Sale and Purchase Agreement,
Sale and Purchase Agreement regarding
Receivables, All Parties Agreement, Master
Agreement on Security Assignment regarding
Claims, Master Agreement on Commitment for
Security Assignment regarding Claims,
Administrative Services Agreement, Guarantee
Agreement, Letter of Agreement, agreements and
other documents related theretoMaster Agreements on
Security Assignment
regarding Claims
    
    Collective term for SD Master Agreement on
Security Assignment regarding Claims and Toshiba
Master Agreement on Security Assignment
regarding ClaimsSD Master Agreement on
Security Assignment
regarding Claims
    
    Collective term for Master Agreement on Security
Assignment regarding Claims (SD Tranche 1)
executed between the SD Borrower and the SD
Lenders on the same date as this Agreement
regarding the right to claim performance of
guaranteed obligations with respect to (i)
claims associated with SD Tranche 1 under this
Agreement and (ii) claims associated with SD
Tranche 1 under this Agreement based on SD
Guarantee Agreement and each individual
agreement based thereon.
 - 6 -




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Toshiba Master Agreement
on Security Assignment
regarding Claims
    
    Collective term for Master Agreement on Security
Assignment regarding Claims (Toshiba Tranche 1)
executed between the Toshiba Borrower and the
Toshiba Lender on the same date as this
Agreement regarding the right to claim
performance of guaranteed obligations with
respect to (i) claims associated with Toshiba
Tranche 1 under this Agreement and (ii) claims
associated with Toshiba Tranche 1 under this
Agreement based on Toshiba Guarantee Agreement
and each individual agreement based thereon.Sale and Purchase
Agreements regarding
Receivables
    
    Collective term for SD Sale and Purchase
Agreement regarding Receivables and Toshiba Sale
and Purchase Agreement regarding ReceivablesSD Sale and Purchase
Agreement regarding
Receivables
    
    Collective term for Sale and Purchase Agreement
regarding Master Lease Receivables (SD Tranche
1) executed between the SD Lessors and the SD
Borrower on the same date as this Agreement
regarding the right to claim performance of
guaranteed obligations with respect to (i)
claims associated with SD Tranche 1 under this
Agreement and (ii) claims associated with SD
Tranche 1 under this Agreement based on the SD
Guarantee Agreement and each individual
agreement based thereonToshiba Sale and
Purchase Agreement
regarding Receivables
    
    Collective term for Sale and Purchase Agreement
regarding Master Lease Receivables (Toshiba
Tranche 1) executed between the Toshiba Lessors
and the Toshiba Borrower on the same date as
this Agreement regarding the right to claim
performance of guaranteed obligations (i) claims
associated with Toshiba Tranche 1 under this
Agreement and (ii) claims associated with
Toshiba Tranche 1 under this Agreement based on
the Toshiba Guarantee Agreement and each
individual agreement based thereon
 - 7 -




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The Administrative
Services Agreement
    
    Collective term for SD Administrative Services
Agreement and Toshiba Administrative Services
AgreementSD Administrative
Services Agreement
    
    SD Administrative Services Agreement concluded
between the SD Lessors and the Administrative
Custodian on the same date as this Agreement
Toshiba Administrative Services AgreementToshiba Administrative
Services Agreement
    
    concluded between the Toshiba Lessors and the
Administrative Custodian on the same date as
this AgreementAdministrative Custodian
    
    Person/s described in Attachment 1, Paragraph 14Letter of Agreement
    
    Letter of consent by the Guarantors and Lessees
in a specified form with respect to assignment
of receivables based on each Agreement on
Security Assignment regarding Claims and
establishment of the right to complete
commitment for security assignment based on the
Agreement on Commitment for Security Assignment
regarding ClaimsMaster Sale and Purchase
Agreement
    
    Collective term for Master Sale and Purchase
Agreement with respect to the Property executed
between Lessee and Lessor on the same date as
this Agreement and each individual agreement
based thereon.The Property
    
    Each unit component (including subject parts) in
each individual transaction reported by Lessee
to Lessor pursuant to Article 4, Paragraph 1 of
Master Sale and Purchase Agreement, confirmed by
a certificate of transfer, receipt and loan
certificate delivered on the delivery date for
said individual transaction. Provided, however,
that if some portion of unit components is
excluded from this Agreement due to the
occurrence of total loss, or by exercise of
purchase options, the remaining unit components
shall constitute the Property thereafter.
 - 8 -




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Master Agreement on
Commitment for Security
Assignment regarding
Claims
    
    Collective term for Master Agreement on
Commitment for Security Assignment regarding
Claims concluded between Lessor and the Lenders
on the same date as this Agreement and
individual agreements pursuant theretoParts
    
    Equipment and parts composing a unit component,
and/or equipment, accessories, attachments and
parts (including collection of parts and parts
of similar kinds) fixed to or furnished with the
PropertyThe Guarantee
Agreements
    
    Collective term for SD Guarantee Agreement and
the Toshiba Guarantee AgreementSD Guarantee
Agreement
    
    Guarantee Agreement concluded
between SanDisk and the SD Lessors on the same date as this
AgreementToshiba Guarantee
Agreement
    
    Guarantee Agreement concluded between Toshiba
and the Toshiba Lessors on the same date as this
AgreementThe Guarantors
    
    Collectively refers to SanDisk and ToshibaSanDisk
    
    Person/s described as SanDisk in Attachment 1,
Paragraph 13.Toshiba
    
    Person/s described as Toshiba in Attachment 1,
Paragraph 13Waived obligations, etc.
    
    Obligations, etc. excluded pursuant to Article
18, Paragraph 1Lease period
    
    Period starting on delivery date stipulated in
Attachment 1, Paragraph 2. Provided, however,
that if this Agreement is cancelled before
expiration, the lease period shall terminate on
such cancellation day.Lease period expiration
date
    
    The last day of a lease periodLease payment
    
    Lease payment determined for each unit component
of each Tranche pursuant to Attachment 1,
Paragraph 3Lease payment
calculation period
    
    Period stipulated in Attachment 1, Paragraph 5Lease payment date
    
    Date stipulated in Attachment 1, Paragraph 4
 - 9 -




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2
    
    With respect to quoting other agreements and documents in this Agreement, if the
relevant agreements and documents are revised, added or changed after the Agreement was
initially executed, they shall mean the relevant agreements and documents after they were
revised, added or changed.3
    
    With respect to quoting provisions in this Agreement, the provisions shall mean,
unless otherwise specially stated, the provisions of this Agreement.4
    
    With respect to referring to parties to the related agreements to this Agreement,
the parties shall also include their successors and accredited assignees.
  1
    
    Lessee and Lessor confirm that transactions listed in Attachment 1, Paragraph 15 are planned with respect to the Property and they are inextricably linked with each other.2
    
    Lessee confirms that Lessor has the ownership of the Property during the lease period under this Agreement.
  1
    
    Pursuant to Master Sale and Purchase Agreement, Lessor shall receive from Lessee each unit component composing the Property on each delivery date and, in the meantime, shall lease said unit component to Lessee.2
    
    A lease of the Property and each unit component under this Agreement shall exist for each individual transaction during its lease period and it shall commence from the issuance date of each loan certificate pursuant to Article 4, Paragraph 5. Except where explicitly provided in this Agreement, a lease of the Property shall neither be cancelled nor terminated prior to its lease expiration date.3
    
    Lessee shall pay the lease payment pursuant to Article 7, Paragraph 2 as compensations for the lease under this Agreement.4
    
    Lessee shall have the right to quiet enjoyment of the Property pursuant to Article 11 and other provisions of this Agreement.
  1
    
    Lessee shall designate a scheduled date to deliver each unit component composing the Property to Lessor pursuant to Attachment 1, Paragraph 1.2
    
    Subject to the satisfaction of the conditions set forth in Article 5, and to receive from Lessee a unit
component on each delivery date at a delivery location in accordance with
 - 10 -




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3
    
    If it becomes necessary to change any scheduled delivery date, Lessee shall notify
Lessor to that effect as soon as possible (at the latest by 5 bank business days prior).
Lessee and Lessor shall agree on each amount of lease payment, payment for exercise of
purchase options, Return Adjustment Fee, repayment standard fee and stipulated loss
payment for each individual transaction, based on the actual property purchase price of
and delivery date for said unit component. In such case, the agreed amount of lease
payment, payment for exercise of purchase options, Return Adjustment Fee, repayment
standard fee and stipulated loss payment, together with the actual property purchase
price and the delivery
date, shall be documented and attached to each loan certificate in the form specified in
Attachment 2.4
    
    Lessee shall bear the cost and liabilities (including break funding cost; further,
if Lessee bears the liability for break funding cost in accordance with this Agreement,
Lessee shall pay the amount calculated based on the definition stipulated in Article 1
for both SD Tranche 1 and Toshiba Tranche 1, respectively. Provided, however, that if
respective amounts and payment periods for SD Tranche 1 and Toshiba Tranche 1 are
different, they shall be appropriately adjusted. Hereinafter, the same in this
Agreement.) incurred as a result of a change of delivery date or delayed or failed
delivery (excluding cases where the cause is attributable to Lessor).5
    
    Lessee shall prepare and deliver to Lessor a loan certificate in the form specified
in Attachment 2 as the delivery of each unit component takes place pursuant to the above
Paragraph 2.6
    
    Delivery of each unit component as part of leasing in each individual transaction
under this Agreement shall be deemed complete by delivery of a loan certificate
referenced in the preceding paragraph. Lessee may use each unit component from such
delivery date of said loan certificate.7
    
    Lessee shall bear all the cost of delivering the Property under this Article.8
    
    In the event where delivery of the Property is not completed during a delivery
period in accordance with Article 4 Paragraph 2, Lessee and Lessor shall faithfully
negotiate a possibility of extending such delivery period.
   - 11 -




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(1)
    
    That no event has occurred by a scheduled delivery date that triggers
Lessor or Lessee to expect changes in laws, orders, notices or other legal,
administrative guidance or tax changes that, in light of the purpose [of the
transaction], Lessor or Lessee reasonably considers appropriate reasons to suspend
or postpone the execution of such transaction planned in accordance with the related
agreements, or that such transaction is illegal. (However, if Lessor or Lessee
determines that an event applicable under this Item has occurred, Lessor or Lessee
shall immediately notify and negotiate with the other party.)(2)
    
    That Lessee has purchased from a manufacturer of the Property said unit
components before such scheduled delivery date from a manufacturer in accordance
with the
Original Purchase Agreement, and Lessee has acquired the ownership thereof without
incurring any obligations etc. (excluding waived obligations).(3)
    
    That said unit component is insured under Article 19 by an insurance that
is effective as of said scheduled delivery date.(4)
    
    That no events of default have occurred.(5)
    
    That no events have occurred that cause Lessor to determine that events
constituting a total loss or leading to a total loss of said unit component.(6)
    
    That related agreements to which Lessor or Lessee shall be a party are
signed by all the parties, issued and continued to be in effect.(7)
    
    That representations and warranties by Lessee under Article 20 are
entirely correct as of said scheduled delivery date under existing conditions on the
same day.(8)
    
    That no significant change has been added to the FLASH PARTNERS MASTER
AGREEMENT executed on September 10, 2004 between the Guarantors and SanDisk
International Limited, or that this Agreement has not been cancelled, dissolved or
terminated.(9)
    
    That the long-term loan rating of SanDisk by Standard & Poors Rating
Services or Moodys Investors Service is BB- or above Ba3, respectively, as of said
scheduled delivery date.
  1
    
    Lessee and Lessor shall take steps necessary for execution of this Agreement and
other related agreements and for authorization required to carry out obligations under
this Agreement by the date of execution of this Agreement or each delivery date and, in
the meantime, shall exchange certificates of seal impression for the seals used in these
agreements (issued within three months prior to each signing), certified copy of company
registration (issued within three months prior to the day of each signing) and Articles
of
 - 12 -




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Incorporation (valid as of the date of signing of this Agreement).2
    
    Lessee shall submit the following documents to Lessor by each scheduled delivery
date:
 (1)
    
    Insurance certificate for said unit component designated in Article 19(2)
    
    Original Letter of Agreement, notarized and dated, for said unit
component(3)
    
    Copies of other documents reasonably requested by Lessor
  1
    
    Lessee and each Lessor agree that monetary claims of Lessor against Lessee in the
form of lease payment, stipulated loss payment, Return Adjustment Fee, payments for
exercise of purchase options and other payments connected to each individual transaction
under this Agreement comprise each SD Tranche 1, SD Tranche 2, Toshiba Tranche 1 and
Toshiba
Tranche 2. Each Tranche regarding each individual transaction shall consist of claims
obtained by dividing such monetary claims by a rate provided in the loan certificate for
said individual transaction. Further, a specific amount for each Tranche in the form of
lease payment, stipulated loss payment, Return Adjustment Fee and payment for exercise of
purchase options for each individual transaction shall be determined by Attachment 1,
Paragraph 3, Paragraph 6, Paragraph 7 and Paragraph 9 of this Agreement and the loan
certificate related to said individual transaction.In addition, (i) in regard to SD Tranche 1 and SD Tranche 2, claims related
to lease payment, stipulated loss payment, Return Adjustment Fee, and payment for
exercise of purchase options shall be attributed to only the SD Lessors (each SD
Lessor holds claims divided by the ratio of its share of the Property), and money
for such claims shall be paid only to the SD Lessors, and (ii) claims related to
lease payment, stipulated loss payment, Return Adjustment Fee, payment for exercise
of purchase options regarding Toshiba Tranche 1 and Toshiba Tranche 2 shall be
attributed to only the Toshiba Lessors (each Toshiba Lessor holds claims divided by
the ratio of its share of the Property), and money for such claims shall be paid
only to the Toshiba Lessors.2
    
    Lessee shall, for each individual transaction, make a lease payment to Lessor for
the lease payment calculation period that ends on each payment date by 11 am on such
payment date.3
    
    In the event that the day that Lessee is supposed to make payment in any amount
that Lessee has payment obligations for each individual transaction under this Agreement
on a day other than a bank business day, with respect to such lease payment, stipulated
loss payment, Return Adjustment Fee, and payment for exercise of purchase options, Lessee
shall make payment on the following bank business day (if the following bank business day
falls in next month, then use the previous bank business day shall apply) and such
payment amount shall be adjusted accordingly. With respect to other payments, payments
shall be made on the following bank business day and such payments shall not be adjusted.
 - 13 -




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4
    
    The amount that Lessee owes under this Agreement shall be paid according to
provisions set forth in Attachment 1, Paragraph 10(2), unless as otherwise agreed by the
parties concerned. However, lease payment, stipulated loss payment, payment for exercise
of purchase options and Return Adjustment Fee due under this Agreement regarding SD
Tranche 1 and SD Tranche 2 shall be paid to the SD Borrower, and lease payment,
stipulated loss payment, payment for exercise of purchase options and Return Adjustment
Fee due under this Agreement regarding Toshiba Tranche 1 and Toshiba Tranche 2 shall be
paid to the Toshiba Borrower in accordance with Attachment 1, Paragraph 10(1). Lessee
confirms that in connection with depositing said payments into the bank account of the
Borrower, the SD Lessors have assigned such amounts to the SD Borrower, and the Toshiba
Lessors have assigned such amounts to the Toshiba Borrower, and each Borrower
has accepted such assignments. If such assignment is cancelled by a prior written notice
by the SD Lessors or Toshiba Lessors to the SD Borrower or the Toshiba Borrower,
respectively, Lessor shall notify Lessee to that effect at the latest one bank business
day before the first lease payment due date that arrives after such cancellation. (In
such case, with respect to lease payment, stipulated loss payment, payment for exercise
of purchase options and Return Adjustment Fee due under this Agreement, the amount with
respect to SD Tranche 1 shall be paid in the bank account of each SD Lender provided in
Attachment 1, Paragraph 10(2); the amount with respect to Toshiba Tranche 1 shall be paid
in the bank account of each Toshiba Lender provided in Attachment 1, Paragraph 10(2); the
amount with respect to SD Tranche 2 shall be paid in the bank account of each SD Lessor
provided in Attachment 1, Paragraph 10(2); and the amount with respect to Toshiba
Tranche 2 shall be paid in the bank account of each Toshiba Lessor provided in Attachment
1, Paragraph 10(2))5
    
    Pursuant to this Agreement, Lessee is obliged to pay Lessor in full amount without
any deduction, offsetting or defense regardless of any reasons (except where Lessor is
responsible), including defective performance etc. by the Property, obligations against
the Property, infringement against use of the Property or bankruptcy proceedings of the
parties concerned. If Lessee is required by decree to withhold tax for the applicable
payment, Lessee shall make an additional payment that is needed to ensure the amount that
the receiving party would have received should such withholding have not been necessary.6
    
    If a lease pursuant to this Agreement for each individual transaction is terminated
on a day other than its lease payment date, regardless of the occurrence of a total loss
of the Property or its unit component, cancellation, exercising of purchase options or
return options by Lessee or other reasons (except where Lessor is responsible for causing
such termination), Lessee shall pay break funding cost to Lessor on said termination day.7
    
    If the amount that Lessee has paid to Lessor or the amount received by Lessor by
 - 14 -




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disposition of the Property under this Agreement is less than the total amount of debts
due on said payment date or receipt date under this Agreement for liquidation, such
amount shall be appropriated to each debt in the following order. However, debts of the
same priority shall be distributed proportionally to the claims each Lessor holds.
 (1)
    
    Amount Lessee is required to pay Lessor under the related agreements.(2)
    
    Default interest related to lease payment, stipulated loss payment,
Return Adjustment Fee, payment for exercise of purchase options due under SD Tranche
1 and Toshiba Tranche 1.(3)
    
    As between lease payments and stipulated loss payments with respect to SD
Tranche 1 and Toshiba Tranche 1, the amount equivalent to lease payment interest
(each amount due under said Tranche, provided in Attachment 1, Paragraph 3 j
(2) and l
(2), and Attachment 1, Paragraph 9 (3) and (9) specified in the loan certificate
for each individual transaction) .(4)
    
    As between lease payments and stipulated loss payments with respect to SD
Tranche 1 and Toshiba Tranche 1, the amount equivalent to the original principal of
the lease payments (each amount due under the relevant Tranche, provided in
Attachment 1, Paragraph 3 j (1) and l (1) and Attachment 1, Paragraph 9
(1), (2), (7) and (8) specified in the loan certificate for each individual
transaction), or amount equivalent to payments for exercise of purchase options or
Return Adjustment Fees.(5)
    
    Default interest on lease payment, stipulated loss payment, Return
Adjustment Fee, and payment for exercise of purchase options related to SD Tranche 2
and Toshiba Tranche 2.(6)
    
    As between lease payments and stipulated loss payments with respect to SD
Tranche 2 and Toshiba Tranche 2, the amount equivalent to lease payment interest
(each amount due under the relevant Tranche provided in Attachment 1, Paragraph 3
k (2) and  (2) and Attachment 1, Paragraph 9 (6) and (12) specified in
the loan certificate for each individual transaction).(7)
    
    As between lease payments and stipulated loss payments with respect to
SD Tranche 2 and Toshiba Tranche 2, the amount equivalent to the original principal
of lease payments (each amount due under the relevant Tranche provided in Attachment
1, Paragraph 3 k (1) and  (1) and Attachment 1, Paragraph 9 (4), (5),
(10) and (11) specified in the loan certificate for each individual transaction),
payments for exercise of purchase options, or amount equivalent to Return Adjustment
Fees.(8)
    
    Other debts.
  1
    
    Lessor shall lease the Property to Lessee on an as is basis, without warranty of
any kind
 - 15 -




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##### 



regarding the Property, whether express or implied, and shall not be liable for
defects in the Property, whether apparent or hidden. Further, Lessor shall make no
guarantee regarding existing obligations etc. regarding the Property or its parts and
shall not be liable for defects irrespective of whether the defects are known or not.2
    
    Lessee, assuming its own responsibility and at its own expense, shall acquire
appropriate quality assurance from the manufacturer of the Property or its parts
supplier, and at the same time make an arrangement for after-sale service and hereby
assigns to Lessor (except where such assignment is prohibited) the rights regarding the
Property, such as the right to claim damages and warranties (including the right to claim
warranty against defects). However, Lessee may exercise the applicable right to claim
damages and warranties in its own name, provided that no event of cancellation has
occurred, and may directly receive
the benefit of the execution of the right to claim damages and warranties during the
lease period from a manufacturer of the Property or its parts suppliers.3
    
    In the event that Lessee suffers damage or a loss due to lack of performance by the
Property, Lessee may, assuming its own responsibility and at its own expense, demand
recovery of such damage or loss directly from a manufacturer of the Property or its parts
manufacturer under the right set forth in the provision of the previous paragraph, and
Lessor shall not be responsible for this. However, Lessees obligations under Article 14
shall not be affected.
  1
    
    If an event of total loss occurs to all or any unit component of the Property
(except where Lessor is responsible), Lessee shall immediately notify Lessor of such
event and provide Lessor stipulated loss payment and other amounts of debts that are due
with respect to the Property and its unit component as of the day of payment on the
earlier date of the following dates: (a) 90th day since the occurrence of said event of
total loss (except where Lessee is not responsible for the total loss event and Lessor
and Lessee have otherwise agreed); or (b) the following bank business day after the day
when an amount greater than the stipulated loss payments is paid as insurance coverage
prescribed in Article 19.2
    
    When Lessee has paid the amount prescribed in the previous paragraph, Lessor shall
assign Lessee the right to the Property or its unit component that suffered a total loss
or the right to a third party acquired as a result of such total loss event (excluding
the right to claim compensation for damages for which Lessor should be held liable) on an
as is basis with respect to performance without the third party providing funds, credits
or other type of guarantee.3
    
    In the event that Lessor has received compensation from a third party as a result
of the occurrence of a total loss event with respect to the Property or its unit
component (including, irrespective of characterization, an amount paid to compensate for
loss and
 - 16 -




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financial burdens due to the occurrence of such total loss event, but excluding
the amount that Lessor should incur to compensate for damage) or received insurance
coverage for the total loss, when Lessee has not met the payment date due under Paragraph
1 (irrespective of whether or not Lessee is aware that the payment date due under
Paragraph 1 has arrived as a result of the payment of total loss insurance coverage ),
the received amount shall be appropriated for payment of stipulated loss payment, and if
there is a surplus after the appropriation, the surplus amount shall be immediately
returned to Lessee upon subtracting unpaid amounts that Lessee owes Lessor under the
related agreements (including late charges), and if there is still deficiency after such
appropriation, Lessee shall not avoid payment of said deficient amount. Further, if
Lessee has paid said stipulated loss payment at the time referenced above, Lessor shall
immediately return the remaining balance of the
received amount to Lessee upon subtracting, if any, unpaid amounts due from Lessee due
under the related agreements.4
    
    During the lease period, Lessee shall incur all the risk and relevant expenses
related to a loss (including total loss events) or damage (in either case, except when
Lessor is responsible) to the Property or its unit component.5
    
    In the event that a total loss event occurs to a unit component and Lessee has paid
stipulated loss payment with respect to said component and paid other unpaid amounts with
respect to such component or the total loss, said unit component shall be removed from
transactions set forth in the related agreements, and Lessee shall be exempt from
obligations to pay future lease payment with respect to said unit component part.6
    
    With respect to a unit component that Lessee reasonably determines, through
Lessees consultation with a manufacturer or maintenance company of the Property after
delivery of such component, that it does not meet Lessees required specification, a
total loss event is deemed to have occurred immediately after delivery on the delivery
date for reasons for which Lessee is not responsible, and the provisions of this Article
shall apply accordingly.7
    
    In the event that a total loss event has occurred to the Property or its unit
component part, or that Lessee judges that the Property or its unit component needs to be
replaced for the purpose of doing business, Lessee may request replacement of the
Property or its unit component, subject to consent by Lessor, the Borrower and the
Lenders (Lessor, the Borrower or the Lenders may not refuse such consent without any
rational reasons, which include the case where Lessor judges, at its own discretion, that
the value of the Property or its unit component after replacement will decrease compared
to the value before replacement (excluding a minor decrease)). Such replacement shall
take place at the expense of Lessee if Lessor, the Borrower and the Lenders agree on
conditions with respect to a replacement property, its cost and other matters of
consideration.
 - 17 -




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##### 



1
    
    Lessee shall, on its own responsibility and at its own expense, install the
Property in Toshiba Yokkaichi Factory in accordance with installation standards or
methods provided by the manufacturers of the Property and regulatory authorities, and
shall not change the installation location without prior consent of Lessor. If
installation of the Property or its unit components takes place outside of Japan, in
addition to prior consent of Lessor, the following must be observed: compliance outside
of Japan of with the provisions of each Article of this Agreement regarding the Property
or its unit components, no compromising of the rights of Lessor, the Borrower and the
Lenders with respect to the Property and rights under the related agreements, and
compliance with laws of Japan and the United States regarding export and re-export
control.2
    
    Lessee shall comply with all applicable laws with respect to installation, use,
operation and handling of the Property (including environmental laws), any request,
conditions imposed and instructions provided by the manufacturers of the Property, parts
suppliers and the insurers and agreements with such parties and, at the same time, shall
use the Property only for legal purposes.3
    
    Lessee shall, on its own responsibility and at its own expense, keep and maintain
records regarding use and operation of the Property.
  1
    
    Lessee shall not, without prior consent of Lessor, transfer the possession of the
Property to a third party, or sublease the Property. However, Lessee may, on its own
responsibility and at its own expense, without consent of Lessor, transfer the possession
of the Property for maintenance or repair to a manufacturer of the Property or approved
maintenance or repair provider, and sublease the Property to an SD Group company or a
Toshiba Group company.2
    
    In the event that the transfer of possession or sublease is executed in accordance
with the
 - 18 -




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##### 



previous paragraph, the transfer of possession or sublease shall not affect
Lessees obligations under this Agreement and shall be subject to the Agreements
Articles, survival and other provisions, and even if Lessee incurs taxes and public dues
as a result of the transfer of possession or subleasing, there shall be no affect on the
lease payment or other lease conditions under this Agreement. Further, Lessee shall, on
its own responsibility and at its own expense, take all reasonable measures so that
Lessor and the Lenders maintain security interests as before (not limited to those
expressed in this Agreement).
  1
    
    Lessee shall, on its own responsibility and at its own expense, keep the Property
in safe
condition at all time.2
    
    Lessee shall, on its own responsibility and at its own expense, perform maintenance
and management of the Property in accordance with provisions of law, perform maintenance
and repair using a method approved or recommended by a manufacturer of the Property or a
parts supplier and a similar method that Lessee has employed with respect to other
similar properties and, in the meantime, retain the Property in the same condition at all
time as the initial condition of the delivery date (excluding normal wear and tear).
Under any circumstances, Lessee shall not perform acts that might cause a significant
adverse effect to the manufacturers warranty of the Property.3
    
    Lessee shall, on its own responsibility and at its own expense, keep and maintain
records regarding maintenance and repair of the Property, including maintenance log.4
    
    Lessee may, for the purpose of maintenance and repair provided in Paragraph 2, on
its own responsibility and at its own expense, replace parts with substitutes that are
similar in performance to the respective parts and owned by Lessee without any obligation
to itself (excluding the waived obligations) or may install parts owned by Lessee without
any obligation for itself (excluding the waived obligations) in the Property without
replacing the parts of the Property. However, in either case, the replacement or
installation shall not cause any changes that are reasonably expected to decrease
performance etc. of the Property, or have adverse effect on its performance etc.5
    
    Lessee may, on its own responsibility and at its own expense, after delivery of the
Property to Lessee in accordance with Article 4, remove, without installing substitutes,
parts that are installed to the Property as an addition, not as a replacement of the
parts, or the parts of which removal does not cause reduced performance etc. of the
Property.
   - 19 -




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##### 



1
    
    Except for circumstances under Paragraph 2, parts that Lessee installed in the
Property under Article 14, Paragraph 4, upon installation, shall comprise the Parts that
constitute the Property and automatically belong to Lessor and be leased from Lessor to
Lessee under this Agreement. With respect to parts that are removed from the Property,
the ownership of the removed parts shall be transferred to Lessee while the ownership of
the substitutes is transferred to Lessor. However, the parts that are exchanged and
removed, though not replaced by similar substitutes, shall still be owned by Lessor
regardless of their location
and are subject to this Agreement.2
    
    Lessee may retain the ownership of parts that are installed to the Property, after
the Property was delivered to Lessee under Article 4, as an addition, not as
replacements, under Article 14, if removal of such parts from the Property is possible
without compromising performance of the Property. Lessor may consider said parts in
accordance with Article 26, Paragraph 3.
    1
    
    Lessee shall not establish, approve, or cause to create any obligation to the
Property and its parts, rights or benefits under this Agreement. Provided, however, such
shall not apply to any obligation arising out of (a) rights of Lessor and Lessee provided
in this Agreement, (b) retention rights or similar security rights of employees,
maintenance providers and repair providers that arise during normal operations of Lessee,
for which a payment due date has not arrived and there is no risk of enforcement of
obligations with respect to the Property, and (c) rights under the related agreements
executed by Lessor, the Lenders and their successor/s and assignee/s (including loan and
security agreements ).2
    
    In the event that an obligation arises that is not excluded by the conditions
stipulated in the previous paragraph, Lessee, on its own responsibility and at its own
expense, shall remove
 - 20 -




---



##### 



the same in an appropriate method.
  1
    
    Lessee shall, on its own responsibility and at its own expense, personally, execute
an insurance agreement to cover damage to and loss of the Property at all times during
the lease period through the Guarantor, Toshiba Group companies or SD Group companies
with an insurance company recognized by Lessor as internationally reliable.2
    
    Regarding insurance referred to in the previous paragraph, the amount of insurance
shall be no less than the amount equivalent to 100% of stipulated loss payment as of the
lease payment date immediately before the date of loss event.3
    
    Lessee shall, in the event that an event insured against, whether total or partial,
occurs to the Property, promptly notify Lessor.4
    
    In the event that damage (partial loss) occurs to the Property, where restoration
or repair of the Property is possible, Lessee shall receive the insurance money paid for
such event. Upon receiving such insurance money, unless the damage has already been
restored or repaired, Lessee shall apply the entire amount of the insurance money to
restoration and repair of the Property. Further, in the event that a total loss event
occurs, the provisions stipulated in Article 9 shall apply.5
    
    Prior to the date of transfer of the Property stipulated in Article 4 and at the
start of each insurance coverage for the period for which insurance coverage is required
pursuant to this Article (at least once a year), Lessee shall obtain documentation that
proves the coverage that meets the above conditions from an insurance company prescribed
in Paragraph 1 and deliver such document to Lessor.6
    
    Terms and conditions for insurance set forth in this Article shall, in all respects
under any circumstances, not be less than insurance that covers property that is similar
to the Property. In the event that terms and conditions of the insurance set forth in
this Article become less than the terms and conditions of such other insurance, the terms
and conditions of the insurance set forth in this Article shall be improved to the terms
and conditions of such other insurance, and Lessee shall promptly conform to the improved
terms and conditions.
  1
    
    Lessee represents and warrants the following items as of the day of this Agreement:
 (1)
    
    That Lessee has concluded the related agreements to which Lessee is a
party, has capacity and authority by law and internal corporate rules and
regulations of the company to exercise the rights and fulfill the obligations under
the related agreements and has processed resolutions of the general meetings of
shareholders and other measures necessary by law and internal corporate rules and
regulations of
 - 21 -




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##### 



the company for the approval of such related agreements and exercise
of its own rights and fulfillment of its obligations.(2)
    
    That preparation, delivery and execution by Lessee of the related
agreements to which Lessee is a party does not, in any respects, violate laws,
Lessees Articles of Association and other documents related to its organizations
and provisions of agreements to which Lessee is a party.(3)
    
    That the related agreements, to which Lessee is a party, are legal,
effective and binding agreements of Lessee where implementation in accordance with
each provision is possible.(4)
    
    That preparation and delivery of the related agreements to which Lessee
is a party, and performance or fulfillment by Lessee of each intended transaction
thereunder do not require in any way approval and license by any government or other
public office or court, notification to or registration with government or other
public office or court, or other procedure, except for those already completed.(5)
    
    That there is no pending judicial or administrative procedure in any way
that would adversely affect execution of the rights or fulfillment of the
obligations by Lessee with respect to the related agreements to which Lessee is a
party.(6)
    
    That Lessee has disclosed to Lessor, the Borrower and the Lenders
business plans for the fiscal year during which the execution date of this Agreement
falls within the scope determined by Lessees directors as reasonably necessary
for implementation of this Agreement.
 2
    
    Lessor represents and warrants the following items as of the execution date of this
Agreement:
 (1)
    
    That Lessor has concluded the related agreements to which Lessor is a
party has capacity and authority by law and internal corporate rules and regulations
of the company to exercise the rights and fulfill the obligations under the related
agreements and has processed passed resolutions of internal corporate meetings and
other measures necessary by law and internal corporate rules and regulations of the
company for the approval of such related agreements and exercise of its own rights
and fulfillment of its obligations.(2)
    
    That preparation, delivery and execution by Lessor of the related
agreements to which Lessor is a party does not, in any respects, violate laws,
Lessors Articles of Association and other documents related to its organizations,
and provisions of agreements to which Lessor is a party.(3)
    
    That the related agreements, to which Lessor is a party, are legal,
effective and binding agreements of Lessor where implementation in accordance with
each provision is possible.
 - 22 -




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##### 



(4)
    
    That preparation and delivery of the related agreements to which Lessor
is a party, and performance or fulfillment by Lessor of each intended transaction
thereunder do not require in any way approval and license by government or other
public office or court, notification to or registration with any government or other
public office or court, or other procedure, except for those already completed.(5)
    
    That there is no pending judicial or administrative procedure in any way
that would adversely affect execution of rights or fulfillment of obligations by
Lessor with
respect to the related agreements to which Lessor is a party.
 3
    
    Representations and warranties of each item in the previous two paragraphs shall be
deemed to be repeated by Lessee and Lessor on the delivery date of each individual
transaction and each lease payment date under the circumstances existing on those days.
  1
    
    Lessee shall make the following commitments to Lessor:
 (1)
    
    Lessee shall manage during the lease period the Property, its unit
components and its parts distinctly from other properties.(2)
    
    Lessee shall fulfill and comply with Lessees obligations pursuant to the
provisions stipulated in the related agreements (including the Original Purchase
Agreements for the purpose of this Agreement).(3)
    
    In the event that a cause for default or cause that may have a
significantly adverse effect on Lessors full rights under the related agreements or
fulfillment of Lessees obligations thereunder arises, Lessee shall notify Lessor to
that effect promptly after learning of the occurrence of such events.(4)
    
    As regards to the related agreements, Lessee shall acquire each consent,
permission, approval, license or acceptance from any government or other public
office or court that such government or public office or court requires Lessee to
acquire in order to continue essentially the same business operations as the
present, shall maintain its effect, and also shall abide by all conditions or
restrictions imposed thereby.(5)
    
    Lessee shall provide Lessor and the Lenders, upon their request, with
information regarding the financial circumstances and business conditions of Lessor
and the Guarantors as Lessor reasonably requests, including financial statements for
which Lessee or the Guarantor has no specific confidentiality obligation, and
information regarding installation, condition, storage, use, maintenance and repair
of the Property after the end of a fiscal year (however, with respect to the
Guarantor, at the end of its half year period and fiscal year).(6)
    
    Lessee shall perform all acts that Lessor reasonably requests as
necessary for establishment, transfer or formation of rights or fulfillment of
perfection, to the extent
 - 23 -




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##### 



that such act is recognized and intended by the related
agreements and within the limitations provided thereunder.(7)
    
    Lessee shall, for each fiscal year, report promptly after the end of each
fiscal year to Lessor progress status of business plans of the fiscal years that are
reasonably recognized by Lessees directors as necessary for implementation of this
Agreement.(8)
    
    If Lessor reasonably demands, Lessee shall cooperate with Lessor and the
Lenders to achieve objectives of the related contracts.(9)
    
    Lessee and the Guarantor shall handle, at their own discretion and
responsibility, accounting and financial matters of Lessee and the Guarantor with
respect to the transaction under this Agreement and its related agreements.(10)
    
    Lessee shall ensure that the Guarantor makes no significant changes to
the FLASH PARTNERS MASTER AGREEMENT executed between the Guarantor and SanDisk
International Limited on September 10, 2004. Provided, however, that this shall not
apply in the event that the Lessor and the Lenders agree otherwise.(11)
    
    Lessee shall cause SanDisk to abide by the following provisions.
Provided, however, that this shall not apply in the event that the Lessor and the
Lenders agree otherwise as to (1) and (3) below.
 (1)
    
    SanDisk shall maintain a long-term debt rating by Standard &
Poors Rating Services or Moodys Investors Service at BB-, Ba3 or above
respectively.(2)
    
    SanDisk shall undertake that no lien shall be attached to any
SanDisk assets without prior written approval by Lessor. Provided, however,
that this shall exclude cases involving normal securitization transactions
regarding loan or inventory or any of the permitted liens listed in Attachment
3 below (Permitted Liens).(3)
    
    SanDisk shall maintain the amount of equity (Total
Stockholders Equity) indicated in consolidated balance sheet as of the end of
each accounting term and mid accounting term of each fiscal year at no less
than 1,164 million US dollars until the termination of this Agreement and
completion of fulfillment of all of Lessees and SanDisks obligations to
Lessor under this Agreement.
  1
    
    Lessee shall, except as otherwise provided in this Article, be responsible and
indemnify for all obligations and loss etc. related to expenses that arise from
ownership, possession, use, application, operation, lease, sublease, installation,
storage, maintenance, repair, improvement, modification, insurance, obligations etc.,
delivery, purchase, transfer, return, performance etc., structure, design, specification,
functions, durability, operability, manufacture of the Property, unit component or its
parts and/or payments due under the
 - 24 -




---



##### 



related agreements (except payment of property
purchase price under the Sale and Purchase Agreement and payment of principal and
interest under the Loan Agreement), taxes and public duties imposed on all or any of
persons to be indemnified in direct or indirect relation to any of the subject
transactions, and loss etc. to be incurred by all or any of persons to be indemnified
and, if there is an instruction from the persons to be indemnified, directly pay to the
authorities or a third party. However, Lessee shall have no obligation of indemnity or
payment stipulated under this paragraph for either taxes or public
duties imposed with respect to net profit of the persons to be indemnified or taxes or
public duties imposed based on or in respect of net profit, or taxes and public duties
otherwise provided in this paragraph.2
    
    In respect of the expenses for preparation, drafting and execution of the related
agreements, each party shall pay its own attorneys fee.3
    
    Expenses arising from fulfillment of obligations and transactions under the related
agreements shall be determined by the express provisions thereof and by the following:
 (1)
    
    Lessee shall bear the bank fees with respect to payments etc. stipulated
in Article 7.(2)
    
    Lessee shall bear the expenses including attorneys fees with respect to
Lessee exercising purchase options or returning the Property.(3)
    
    Expenses including attorneys fees that arise from default by any of
parties involved shall be incurred by the defaulting party.
 4
    
    Taxes and public duties with respect to the related agreements shall be determined
by the express provisions thereof and by the following.
 (1)
    
    Except as otherwise agreed by and between parties to this Agreement, with
respect to consumption tax imposed on payment of sales and purchase price and lease
payments for the Property due under the related agreements, the parties involved
that make these payments shall pay the amount of consumption tax to the receiving
parties along with these payments. Provided, however, this shall not apply in the
case that any of the parties to this Agreement may be exempt from consumption tax
under the provisions of consumption tax law.(2)
    
    Fixed property tax imposed on the Property shall be paid by those subject
to such tax by operation of law. However, if Lessor is subject to such payment,
Lessee shall pay Lessor the amount equivalent to the fixed property tax.
 5
    
    Taxes and public duties that Lessee indemnifies or pays those persons to be
indemnified under this Article shall be based upon net amount after tax.6
    
    If the loan interest rate is increased or each Borrower is charged with additional
costs in accordance with each Loan Agreement, Lessor may, upon written notice, based on
charges from each Borrower, increase lease payment applicable to SD Tranche 1 or Toshiba
Tranche 1 using a reasonable calculation method, or may demand payment of the relevant
 - 25 -




---



##### 



additional costs to Lessee. In such case, each amount of the applicable payment for the
exercise of purchase options, Return Adjustment Fee, repayment standard fee and
stipulated loss payment shall be recalculated as well.7
    
    In the event that taxes and public duties and other expenses to be incurred by
Lessee pursuant to the related agreements are charged to Lessor or paid in advance by
Lessor, Lessee shall immediately pay Lessor, upon request by Lessor, the amount of the
relevant payment and interest calculated from the payment date in accordance with
provisions of
Article 27. Provided, however, Lessor shall immediately notify Lessee if Lessor is
charged with such taxes and public duties and other expenses, or has paid such amount.
  1
    
    Lessee and Lessor shall perform the first individual transaction in the period
starting [*] and ending [*], and may execute up to
[*] times in [*] months after the first individual
transaction. Provided, however, the number of individual transactions and deliverable
period shall be set forth in Attachment 1, Paragraph 1.2
    
    Lessee and Lessor may, if prior written approval of the Lender and the Borrower are
obtained, change the execution period of individual transactions and the number of
individual transactions provided in the previous paragraph, and in this case Lessee and
Lessor shall, if a change is needed regarding terms and conditions of payment, including
lease payment, stipulated loss payment, payment for exercise of purchase option payments
and Return Adjustment Fee, discuss such changes.
  1
    
    Lessee may, for each individual transaction, by notifying Lessor no less than 30
days in advance of each lease payment date, purchase all of the Property or any unit
component (provided, however, exercise of purchase options for any unit component shall
be in accordance with the provisions in Paragraph 4 below) by paying Lessor the relevant
payment for exercise of purchase option and the other amounts that are due with respect
to the Property or said unit component as of said lease payment date (provided, however,
for each individual transaction on the final lease payment date, whether or not there is
notification from Lessee, unless the leased item is returned pursuant to Article 25, the
purchase options shall be deemed to have been exercised). Notice of exercise of purchase
options under this paragraph shall not be withdrawn.2
    
    If Lessee exercises purchase options stipulated in the previous paragraph and has
paid the
 
 *
    
    Indicates that certain information
contained herein has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to
the omitted portions. - 26 -




---



##### 



amount as prescribed in the previous paragraph, Lessors ownership and any other
rights with respect to such Property or its unit component shall be transferred to Lessee
on an as is basis without warranty and others at the time of completion of its payment.
Provided, however, Lessor shall warrant to Lessee that no obligations etc. with respect
to the Property or its unit component that arise from causes created by Lessor or
attributable to Lessor exist at the time of such transfer.3
    
    Lessor shall deliver a certificate of transfer provided in Attachment 5 to Lessee
when receiving the amount as prescribed in Paragraph 1 has been paid.4
    
    Exercise of purchase options with respect to some unit components and not the
entire Property may be allowed only if the total amount of property purchase cost of said
unit component that Lessee is to purchase on a lease payment date pursuant to this
Article exceeds [*] Yen and Lessors consent is obtained (Lessor may not
reject such consent without any rational reasons, which include the case that Lessor
determines, at its own discretion, that the relative value of the remaining Property
against payment for exercise of purchase options of the Property after the purchase of
said unit component has decreased (excluding slight decrease) compared to that of the
Property before such purchase.) Further, of the payment for exercise of purchase options,
the maximum amount that is appropriated to the original principal of each of SD Tranche 1
and Toshiba Tranche 1 shall be the amount calculated by multiplying a property purchase
cost of said unit component by rates provided in the stipulated loss payments column (A)
and (C) of a loan certificate.5
    
    Lessee shall incur all expenses regarding exercise of purchase options by Lessee.
  1
    
    Lessee may, in accordance with the following provisions, for each individual
transaction, return to Lessor all unit components that are subject to said individual
transaction at the location designated by Lessor on the anniversary of the delivery date
each year during the lease period (hereinafter referred to as return date) by notifying
Lessor and the Lenders no less than [*] days in advance. Provided, however, if
any of reasons for cancellation or default (including reasons for cancellation and for
default with respect to provisions regarding return in this Article) has occurred on such
return date, or purchase by exercising purchase options pursuant to Article 24 takes
place on the same day as the return date, Lessee may not return the Property under this
Article. Notification of exercise of return options pursuant to this Article may be
withdrawn until [*] days before such return date.
 (1)
    
    When Lessee returns the Property to Lessor pursuant to this Article, the
Property shall
 
 *
    
    Indicates that certain information
contained herein has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to
the omitted portions. - 27 -




---



##### 



be in a good condition as at the time of delivery in Article 4, its
normal use is possible, and that Lessor determines that all of the requirements for
conditions at the time of return of the Property prescribed in Attachment 6 are met,
except for normal wear and tear and changes etc. performed in accordance with
provisions of Article 14, Paragraph 4 or 5, or Article 15.(2)
    
    Lessee shall deliver, with return of the Property to Lessor, in addition
to a maintenance and repair log of the Property, all records or copy thereof of
installation, storage, use, operation, maintenance and repair of the Property and,
if Lessor requests, a certificate by the Property manufacturer, the Property parts
supplier or a property maintenance and repair provider approved by the property
manufacturer that certifies the items provided in Item (1) of this paragraph.(3)
    
    Lessee shall approve that Lessor, the Lenders or a party that is to
become a buyer of the Property that Lessor has designated (and related parties
thereof) enters the office and factory of Lessee or its installation location to
inspect the Property prior to return of the Property in accordance with Article 17.(4)
    
    Lessee shall, on the return date, with return of the Property, pay Lessor
the Return Adjustment Fee for retuning the Property as of the return date and other
amounts due under the related agreements.(5)
    
    If Lessor incurs a debt against Lessee under the related agreements on
the return date, Lessor shall, on the return date, upon return of the Property, pay
Lessee the relevant amount.(6)
    
    Return of the Property under this Article shall be allowed only with
respect to all unit components subject to the relevant individual transaction, and
shall not be allowed with respect to only some unit components.(7)
    
    Lessee shall, in electing return under this Article, upon discussion with
Lessor, work to offer a third party who purchases the Property with purchase
conditions with which Lessor is objectively satisfied. Provided, however, this shall
not apply in the case where the Property or any of its unit components is discarded
in accordance with Paragraph 4.
 2
    
    Lessor shall, when receiving the returned Property, prepare a certificate of return
as provided in Attachment 4 and delivery it to Lessee.3
    
    Lessee shall, if requested by Lessor, on its own responsibility and at its own
expense, hold in trust the Property for Lessor for maximum of [*] after
the return date, and shall perform maintenance management, inspection and maintenance in
accordance with this Agreement
 
 *
    
    Indicates that certain information
contained herein has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to
the omitted portions. - 28 -




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##### 



in order to maintain the same level of performance etc. as
on the delivery date by the Property at all times, and if the Property is damaged,
regardless of the cause, shall restore it to its original condition.4
    
    Notwithstanding the provisions of Paragraph 1, Lessor may request Lessee to dispose
all or a part of unit components that constitute the Property before the return date. In
this case,
Lessee shall, upon delivery of acknowledgement to Lessor, on its own responsibility and
at its own expense, immediately dispose of the requested unit components within Japan.
Lessee shall, for such disposition, comply with the applicable laws (including
environmental laws). Provided, however, if Lessor needs to dispose on its own behalf,
Lessee shall bear such cost and provide necessary support. In any event, Lessor may
request Lessee to provide documentation that confirms disposition or any related
documents, or copies thereof.5
    
    Lessee shall incur maintenance expense, removal expense, transport expense, storage
expense, resale expense and all other expenses related to the return of the Property, and
all expenses related to disposition of the Property.6
    
    If Lessor sells the Property to a third party within [*] of return
of the Property by Lessee to Lessor under this Article, and if the net amount after
deducting taxes and public dues, sales fee, and any other expenses from the received
amount of the sales proceeds exceeds the Return Adjustment Fee of the Property as of the
return date, Lessor shall pay Lessee the amount equivalent to [*]% of such
difference of such sales proceeds and the Return Adjustment Fee. Lessee shall incur taxes
and public duties charged on such payment.7
    
    In disposing Property that is returned pursuant to this Article, conditions and
methods etc. of disposition shall be determined by discussion with SD Lessor RA and
Toshiba Lessor RA.
  1
    
    Lessor may, upon the occurrence of any one of the following events, with only
written notice without formal demand, accelerate all payments owing by Lessee under this
Agreement or any or all of the individual transactions and terminate this Agreement or
any or all of the individual transactions.
 (1)
    
    If Lessee defaults a lease payment and payment for other debts due under
the related agreements and does not make the relevant payments within 2 bank
business days of receipt of written notice to that effect from Lessor.(2)
    
    If Lessee neglects to obtain and keep required insurance in accordance
with this
 
 *
    
    Indicates that certain information
contained herein has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to
the omitted portions. - 29 -




---



##### 



Agreement.(3)
    
    If Lessee neglects to remove obligations etc. in accordance with this
Agreement.(4)
    
    If Lessee violates the provisions of the related agreements, in addition
to the previous Item, and does not correct the relevant violations within 10 bank
business days of receipt of written notice to that effect from Lessor.(5)
    
    If Lessee or a Guarantor is subject to compulsory execution, petition for
auction or disposition for failure to pay taxes and public duties, or petition for
the commencement of bankruptcy proceedings (including petition for similar
procedures or dispositions under foreign law). Provided, however, except where the
relevant petition or disposition is cancelled or dissolved within 30 days.(6)
    
    If Lessee or a Guarantor starts private dissolution, passes a resolution
to liquidate or dissolve all or the major part of the business operation (provided,
however, except in the case of corporate reorganization that does not follow a
procedure provided in Item (5) for Lessee or the Guarantor, and Lessor, the Borrower
and the Lenders have consented thereto), or receives an order of business suspension
of all or major part of business or operation or other discontinuance of all or
major part of business or operation from a public office (It shall be considered to
fall under this Item (6) if operation of the Property by Lessee has ceased for more
than 2 months and without any prospect for resumption).(7)
    
    If Lessee or a Guarantor transfers all or major part of its business.
Provided, however, except in the case of corporate reorganization that does not
follow a procedure of Item (5) for Lessee or the Guarantor, and Lessor, the
Borrower, the Lenders have consented thereto.(8)
    
    If Lessee or a Guarantor stops payment or suffers suspension by a bill
clearing house.(9)
    
    If the direct or indirect rate of equity participation by each Guarantor
with respect to Lessee changes. Provided, however, except where Lessor, the Borrower
and the Lenders otherwise have consented thereto.(10)
    
    If the FLASH PARTNERS MASTER AGREEMENT executed between Toshiba
Corporation, SanDisk Corporation and SanDisk International Limited on September 10,
2004 is cancelled, dissolved, or terminated.(11)
    
    If Lessee or a Guarantor suffers acceleration with respect to debt
greater than 20 million US dollars. Provided, however, that this shall not include
cases where it is determined that the creditor has consented or agreed to the delay
(including cases where the creditor is silent pursuant to commercial practices).(12)
    
    If the amount of equity (Total Stockholders Equity) in consolidated the
balance sheet as of the last of accounting term and mid accounting term of each
fiscal year of SanDisk becomes less than 1,164 million US dollars.
 - 30 -




---



##### 



(13)
    
    If a long-term debt rating of SanDisk by Standard & Poors Rating
Services or Moodys Investors Service is decreased to below BB- or Ba3, respectively(14)
    
    In addition to the foregoing items, there exists a significant cause,
objectively recognized, whereby voluntary and smooth performance of the obligations
due under this Agreement becomes difficult due to a significant change in conditions
regarding
assets and creditworthiness of Lessee or a Guarantor, and there is no discussion of
cure measures arranged within 30 days of receipt of notice to that effect from
Lessor by Lessee.
 2
    
    If this Agreement is terminated under the previous paragraph, Lessee shall return
the Property to Lessor on the date specified by Lessor for termination (hereinafter
referred to as termination date), and pay all amounts due that have not been paid as of
the termination date, including unpaid lease payments due to be paid on a lease payment
date before the termination date and late charges thereof and stipulated loss payment as
of the termination date as provided in Attachment 1, Paragraph 9.3
    
    In the event that this Agreement is terminated in accordance with Paragraph 1,
Lessor shall, following its selection, liquidate all or a portion of debts of the
previous paragraph by method provided in each of the following Items.
 (1)
    
    Upon disposing of the Property by sale under sales conditions determined
at its own discretion, the amount equivalent to the amount of such net sales
proceeds from which expenses have been deducted is less than the amounts owing
under the previous paragraph.(2)
    
    Upon appraising fair market price of the Property, the amount equivalent
to such appraisal amount from which expenses are deducted is less than the amounts
owning under the previous paragraph.
 In addition, of the amounts owing under the previous paragraph, Lessee shall not avoid
liability for any of such amount remaining after such liquidation. Lessor shall
immediately return to Lessee the remaining balance after the total amounts owing under
the previous paragraph is satisfied by such liquidation.4
    
    When Lessee returns the Property pursuant to Paragraph 2, conditions of the
Property, method of return and others shall be determined by the provisions of Article
25, unless otherwise provided in this Article.5
    
    Notwithstanding the provisions of each of the previous paragraphs, Lessee may,
until Lessor disposes of the Property or its unit components by sale in accordance with
Paragraph 3, purchase the Property or its unit component that have not been sold by
paying to Lessor stipulated loss payment with respect to the Property or unit component
as of the termination date, unpaid lease payments and other amounts that Lessee is
required to pay to Lessor under Paragraph 2 (including late charges) (provided, however,
except for a case of
 - 31 -




---



##### 



purchasing the entire Property, this may be approved only when
Lessors consent is provided ). If Lessee purchases the Property or its unit component by
making such payment to Lessor, Lessor shall transfer title to the Property or its unit
component to Lessee on an as is basis without warranty. Such transfer shall be pursuant
to provisions of certificate of transfer in the form provided in Attachment 5.6
    
    Lessor may, with respect to every term and condition of the related agreements,
seek injunction of defaults or specific performance, claims for compensation regarding
losses or liability suffered by Lessor, and any other remedies recognized by law.7
    
    In the event that any reason for termination set forth in Paragraph 1 (12) or (13)
occurs, that termination event shall be deemed not to have occurred if SanDisk, the SD
Lessors, and the SD Lenders have agreed on the supplementary security to be supplied by
SanDisk, or if they have agreed on the amount of lease and stipulated loss payment
pursuant to this Agreement and on revision of the spread used to calculate the interest
rate pursuant to the Loan Agreement.8
    
    Lessee may, in the event that any reason for termination provided in each Item of
Paragraph 1 occurs, by obtaining prior written consent of Lessor, transfer the status of
Lessee under this Agreement and its related agreements to both or either of the
Guarantors. In such case, the relevant reason for termination is cured and shall be
deemed to not have occurred.9
    
    In the event that a reason for termination provided in Paragraph 1 (5) through (8)
and (10) through (14) occurs for either Guarantor, the other Guarantor may succeed the
status of Guarantor within 30 days of the date of the occurrence of said event if such
other Guarantor delivers a guarantee or security acceptable to Lessor and the Lenders,
then in such case, such termination event shall be deemed not to have occurred.
  *
   
 *
    
    Indicates that certain information
contained herein has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to
the omitted portions. - 32 -




---



##### 



(1)
    
    For each individual transaction, SD Lessor may transfer to the SD
Borrower under the SD Sale and Purchase Agreement regarding Receivables any and all
obligations related to the lease payments, stipulated loss payments, payments for
purchase options, exercise, Return Adjustment Fees, break funding costs, late
charges, and any other amounts related to SD Tranche 1.(2)
    
    For each individual transaction, Toshiba Lessor may transfer to the
Toshiba Borrower under the Toshiba Sale and Purchase Agreement regarding Receivables
any and all obligations related to the lease payments, stipulated loss payments,
payments for purchase options exercise, Return Adjustment Fees, break funding costs,
late charges, and any other amounts related to Toshiba Tranche 1.(3)
    
    For each individual transaction, the SD Borrower may, as security for the
SD Loan Agreement for the SD Lenders, transfer the assigned obligations of Paragraph
1 under the SD Agreement on Security Assignment regarding Claims.(4)
    
    For each individual transaction, the Toshiba Borrower may, as security
for the Toshiba Loan Agreement for the Toshiba Lenders, transfer the assigned
obligations of Paragraph 1 under the Toshiba Agreement on Security Assignment
regarding Claims.(5)
    
    For each individual transaction, Lessor may, as security for the Loan
Agreement for the Lenders, assign the Property under the Master Agreement on
Commitment for Security Assignment regarding Claims.
   1
    
    Except as provided in Paragraph 3 of this Article, performance of monetary
obligations that Lessee owes to the SD Lessor under this Agreement shall be recoverable
against only the following money and other assets (hereinafter referred to as SD
recourse property), and Lessee shall not be responsible for default by any parties to
the related agreements other than itself or price fluctuations or any inability to
dispose of the Property. Except in respect of the SD recourse property, the SD Lessor
shall not file petition for attachment,
 - 33 -




---



##### 



provisional attachment or other compulsory
procedures, or protective orders against Lessees assets, and shall not seek bankruptcy
procedures against Lessee.
 (1)
    
    Amounts equal to lease payment, stipulated loss payment, Return
Adjustment Fee, payment for exercise of purchase options, break funding costs and
late charges related to SD Tranche 1 and SD Tranche 2 and other monies related to SD
Tranche 1 and SD Tranche 2 under the Master Lease Agreement.(2)
    
    Monetary amounts that the SD Lessor may claim pursuant to the SD
Guarantee Agreement with respect to the rights related to the monies stipulated in
the previous Item.(3)
    
    The SD Lessors shared equity of the Property.(4)
    
    Amounts that the SD Lessor receives as a result of exercise or execution
of rights under the related agreements (irrespective of compulsory or voluntary
procedures).
 2
    
    Except as provided in Paragraph 3 of this Article, performance of monetary
obligations that Lessee owes to the Toshiba Lessor under this Agreement shall be
recoverable against only the following money and other assets (hereinafter referred to as
Toshiba recourse property) and Lessee shall not be responsible for default by any
parties to the related agreements other than itself, price fluctuations or any inability
to dispose of the Property. Except in respect of the Toshiba recourse property, the
Toshiba Lessor shall not file petition for attachment, provisional attachment or other
compulsory procedures, or protective orders against Lessees assets, and shall not seek
bankruptcy procedures against Lessee.
 (1)
    
    Amounts equal to lease payment, stipulated loss payment, Return
Adjustment Fee, payments for exercise of purchase options, break funding costs and
late charges related to Toshiba Tranche 1 and Toshiba Tranche 2 and other monies
related to Toshiba Tranche 1 and Toshiba Tranche 2 under the Master Lease Agreement.(2)
    
    Monetary amounts that the Toshiba Lessor may claim pursuant to the
Toshiba Guarantee Agreement with respect to the rights related to the monies
stipulated in the previous Item.(3)
    
    The Toshiba Lessors shared equity of the Property.(4)
    
    Amounts that the Toshiba Lessor receives as a result of exercise or
execution of rights under the related agreements (irrespective of compulsory or
voluntary procedures).
 3
    
    Notwithstanding the provisions of the previous two paragraphs, Lessee shall not be
exempt from liability and shall owe absolute obligations and responsibility to Lessor
under the Master Lease Agreement or its related agreements with respect to loss, damage,
expenses and cost Lessor incurs or suffers for reasons attributable to Lessees
responsibility and in that case the provisions of the previous two paragraphs shall not
apply. Further, this paragraph shall not extend to the other Tranche the several
obligations for each Tranche of
 - 34 -




---



##### 



the respective Guarantor under the Guarantee Agreements.4
    
    The provisions of Paragraph 1 and Paragraph 2 shall only restrict sources of
payment with respect to payment of monetary obligations provided in the same paragraphs,
and shall not affect the existence of such debts or reduce such debts, nor restrict
exercise of Lessors rights under the related agreements or security rights/liens held by
Lessor.
      1
    
    Each party to this Agreement shall pledge to keep strictly confidential contents of
this Agreement and its related agreements and information or documents received through
negotiations thereon in accordance with the provisions thereof for [*]
years from the day of execution of this Agreement. Provided, however, except as in the
case of disclosure of information or documents that are already publicly known,
disclosure that accompanies marketing of the Property, disclosure that is necessary for
exercise of rights or fulfillment of obligations under the related agreements, and
disclosure at the request of tax authorities and other related authorities or disclosure
due to prior consent of all parties to this Agreement.2
    
    Period of confidentiality provided in the previous paragraph shall be automatically
renewed for [*] year, unless there is notice of cancellation of
confidentiality from Lessee, and the same shall apply thereafter. Provided, however,
Lessor may request confirmation from Lessee with respect to the extension of period of
confidentiality at the [*] year or at the end of an extended period.3
    
    In the event that a party to this Agreement infringes the obligations of Paragraph
1, said party shall compensate economic damages incurred by other parties.
 
 *
    
    Indicates that certain information
contained herein has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to
the omitted portions. - 35 -




---



##### 



- 36 -




---



##### 



SD Lessor
    
    :
    
    IBJ Leasing Co., Ltd.as well asToshiba Lessor
 - 37 -




---



##### 



SD Lessor
    
    :
    
    Sumisho Lease Co., Ltd.as well asToshiba Lessor
 - 38 -




---



##### 



SD Lessor
    
    :
    
    Toshiba Finance Corporation
 - 39 -




---



##### 



Lessee
    
    :
    
    Flash Partners Yugen Kaisha
 - 40 -




---



##### 



Lease Terms and Conditions
 1
    
    Designation of scheduled delivery day, the last possible date for delivery and of Property
 * * * * * *
 2
    
    Lease period
  3
    
    Calculation of lease payments
  j
    
    (SD Tranche 1)For each lease payment calculation period, the total sum of (1) property purchase price
for the Property in each individual transaction multiplied by the ratio in the following
(A); and (2) the interest amount calculated pursuant to the following Paragraph 9 (1) as
of the lease payment date with respect to the lease payment calculation period
immediately prior to the relevant lease payment calculation period (in the event that the
prior lease payment calculation period does not exist, delivery date is used) multiplied
by the interest rate of Euro Yen TIBOR with respect to the first date through the last
date of the lease payment calculation period plus the following SD Tranche 1 spread
(calculated on a pro-rate basis with 360 days a year).(SD Tranche 1 spread)
 
 *
    
    Indicates that certain information
contained herein has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to
the omitted portions. - 41 -




---



##### 



In the event that a long-term debt rating of
SanDisk by Standard & Poors Rating Services
or Moodys Investors Service (hereinafter
collectively referred to as the designated
rating agency) as of the date of this
Agreement is BB- or Ba3 or below
respectively;
    
    [*] % p.a.In the event that a long-term debt rating of
SanDisk by the designated rating agency is
BB or Ba2 respectively;
    
    [*] % p.a.In the event that a long-term debt rating of
SanDisk by the designated rating agency is
BB+ or Ba1 or above respectively.
    
    [*] % p.a.
 Further, changes in SD Tranche 1 spread in the above-referenced formula shall apply from
the lease payment calculation period that arrives after a formal public announcement by a
designated rating agency (provided, however, that if said public announcement is made
after 10 business days prior to the start of the lease payment calculation period, they
shall apply from the lease payment calculation period following the next lease payment
calculation period).k
    
    (SD Tranche 2)For each lease payment calculation period, the total sum of (1) the amount obtained by
multiplying the purchase price of the Property in each individual transaction by the
ratio in the following (B); and (2) the interest amount calculated pursuant to the
following Paragraph 9 (4) as of the lease payment date with respect to the lease payment
calculation period immediately prior to the lease payment calculation period (delivery
date in the event that the immediately prior lease payment calculation period does not
exist) multiplied by the interest rate of Euro Yen TIBOR with respect to the first date
through the last date of the lease payment calculation period plus the following SD
Tranche 2 spread (calculated on a pro-rate basis with 360 days a year).(SD Tranche 2 spread)
 In the event that a long-term loan rating of SanDisk
as of the day of this Agreement by the designated
rating agency is BB- or Ba3 or below
respectively;
    
    [*]% p.a.In the event that a long-term loan rating of SanDisk
by the designated rating agency is BB or Ba2
respectively;
    
    [*]% p.a.In the event that long-term loan rating of SanDisk
by the designated rating agency is BB+ or Ba1 or
above respectively;
    
    [*]% p.a.
 Further, changes in the SD Tranche 2 spread based on the above-referenced formula shall
apply from the lease payment calculation period after a formal public announcement by a
 
 *
    
    Indicates that certain information
contained herein has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to
the omitted portions. - 42 -




---



##### 



designated rating agency (provided, however, that if said formal announcement is made
after 10 business days prior to the first date of lease payment calculation period, the
change shall apply from the lease payment calculation period following the next lease
payment calculation period).l
    
    (Toshiba Tranche 1)For each lease payment calculation period, the total sum of (1) the amount obtained by
multiplying the purchase price of the Property in each individual transaction by the rate
in the following (C); and (2) the interest amount calculated pursuant to the following
Paragraph 9 (7) as of the lease payment date with respect to the lease payment
calculation period immediately prior to the relevant lease payment calculation period
(delivery date in the event that the immediately prior lease payment calculation period
does not exist) multiplied by the interest rate of Euro Yen TIBOR with respect to the
first date through the last date of the lease payment calculation period plus
[*]
%p.a. (calculated on a pro-rate basis with 360 days a year).m
    
    (Toshiba Tranche 2)For each lease payment calculation period, total sum of (1) amount obtained by
multiplying a purchase price of the Property in each individual transaction by the ratio
in the following (D); and (2) interest amount calculated pursuant to the following
Paragraph 9 (10) as of the lease payment date with respect to the lease payment
calculation period immediately prior to the relevant lease payment calculation period
(delivery date in the event that the immediately prior lease payment calculation period
does not exist) multiplied by the interest rate of Euro Yen TIBOR with respect to the
first date through the last date of the lease payment calculation
period plus [*]%
p.a. (calculated on a pro-rate basis with 360 days a year).
      
 *
    
    Indicates that certain information
contained herein has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to
the omitted portions. - 43 -




---



##### 



payment due date) or the date two bank business days prior to the previous interest
calculation date (as defined in Article 1). Provided, however, that in the event that the lease payment calculation
period is less than three months, the rate shall be separately defined in the loan
certificate.4
    
    Lease payment dateIn each individual transaction, a corresponding date three months after each delivery date
shall be the first lease payment date, followed by a corresponding delivery date for each
subsequent three-month period (in the event that a delivery date falls on the last bank
business day of a month, the last bank business day of each three-month period shall be the
lease payment date). However, in the event that the relevant corresponding date is not a bank
business day, the payment date shall be determined pursuant to the
provisions of Article 7,
Paragraph 3 of this Agreement.5
    
    Lease payment calculation periodIn each individual transaction, a period that starts on the delivery date and ends on the date
a day before the first lease payment date shall be the first lease payment calculation period,
followed by a period that starts on the following day of the last date of the prior lease
payment calculation period and ends on a day before the following lease payment date.
Provided, however, that in the event that this Agreement is cancelled before termination, the
last lease payment calculation period is until the relevant cancellation date.6
    
    Payment for exercise of purchase option amountsAs described in the relevant loan certificate for each individual transaction.7
    
    Return Adjustment FeeAs described in the relevant loan certificate for each individual transaction.8
    
    Repayment standard feeAs described in the relevant loan certificate for each individual transaction.9
    
    Stipulated loss paymentThe total sum of the following (1), (4), (7) and (10) with respect to the delivery date or
each lease payment date. Provided, however, that the lease payment as of the relevant lease
payment date shall be paid separately. In the event that a date on which a stipulated loss
payment shall be paid is neither a delivery date nor lease payment date, it shall be the total
sum of the following (2), (3), (5), (6), (8), (9), (11) and (12).
 - 44 -




---



##### 



(SD Tranche 1)
 (1)
    
    The amount obtained by multiplying the purchase price for the Property or unit
component
purchase price with respect to the delivery date or lease payment date by the rate
referenced in the following (A)(2)
    
    The amount obtained by multiplying by the rate in the following (A) with respect to
the delivery date immediately before the date on which payment should be made for the
purchase price of the Property or its unit component part or lease payment date.(3)
    
    The amount of interest calculated by multiplying the amount mentioned above in (2)
by the interest rate of Euro Yen TIBOR stipulated in the list attached to the Loan
Agreement, Paragraph 6 (3) with respect to a period from the first date of the lease
payment calculation period through the date on which a stipulated loss payment should be
paid plus the SD Tranche 1 spread mentioned below (calculated on a pro-rate basis with
360 days a year).(SD Tranche 1 spread)
 In the event that a long-term debt rating of
SanDisk by the designated rating agency as of
the day of this Agreement is BB- or Ba3 or
below respectively;
    
    [*]% p.a.Long-term debt rating of SanDisk by the
designated rating agency is BB or Ba2
respectively;
    
    [*]% p.a.Long-term debt rating of SanDisk by the
designated rating agency is BB+ or Ba1 or
above respectively.
    
    [*]% p.a.
 Further, the above changes shall apply only when a formal public announcement by a
designated rating agency has been made at least 10 bank business days before the
immediately preceding delivery date or the lease payment date.
 (SD Tranche 2)
 (4)
    
    The amount obtained by multiplying the purchase price for the Property or its unit
component purchase price with respect to the delivery date or lease payment date by the
rate referenced in the following(B)(5)
    
    The amount obtained by multiplying by the rate in the following (B) with respect to
the delivery date immediately before the date on which payment should be made for the
purchase price of the Property or its unit component part or lease payment date.(6)
    
    The amount of interest calculated by multiplying the amount mentioned above in (5)
by the interest rate of Euro Yen TIBOR stipulated in the list attached to the Loan
Agreement, Paragraph 6 (3) with respect to a period from the first date of the lease
payment calculation
 
 *
    
    Indicates that certain information
contained herein has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to
the omitted portions. - 45 -




---



##### 



period through the date on which a stipulated loss payment should be
paid plus the SD Tranche 2 spread mentioned below (calculated on a pro-rate basis with
360 days a year).(SD Tranche 2 spread)
 Long-term loan rating of SanDisk as of the day
of this Agreement by the designated rating
agency is BB- or Ba3 or below
respectively;
    
    [*]% p.a.Long-term loan rating of SanDisk is BB or
Ba2 respectively;
    
    [*]% p.a.Long-term loan rating of SanDisk by the
designated rating agency is BB+ or Ba1 or
above respectively;
    
    [*]% p.a.
 
  (7)
    
    The amount obtained by multiplying the purchase price for the Property or its unit
component purchase price with respect to the delivery date or lease payment date by the
rate referenced in the following(C).(8)
    
    The amount obtained by multiplying by the rate in the following (C) with respect to
the delivery date immediately before the date on which payment should be made for the
purchase price of the Property or its unit component part or lease payment date.(9)
    
    The amount of interest calculated by multiplying the amount mentioned above in (8)
by the interest rate of Euro Yen TIBOR stipulated in the list attached to the Loan
Agreement, Paragraph 6 (3) with respect to a period from the first date of the lease
payment calculation period through the date on which a stipulated loss payment should be
paid plus [*]% p.a. (calculated on a pro-rate basis with 360 days a year).
  (10)
    
    The amount obtained by multiplying the purchase price for the Property or its unit
component purchase price with respect to the delivery date or lease payment date by the
rate referenced in the following (D).(11)
    
    The amount obtained by multiplying by the rate in the following (D) with respect to
the delivery date immediately before the date on which payment should be made for the
purchase price of the Property or its unit component part or lease payment date.(12)
    
    The amount of interest calculated by multiplying the amount mentioned above in (8)
by the interest rate of Euro Yen TIBOR stipulated in the list attached to the Loan
Agreement,
 
 *
    
    Indicates that certain information
contained herein has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to
the omitted portions. - 46 -




---



##### 



Paragraph 6 (3) with respect to a period from the first date of the lease
payment calculation period through the date on which a stipulated loss payment should be
paid plus [*]% p.a.
(calculated on a pro-rate basis with 360 days a year).
     10
    
    Payment method
 j
 *  *  *  *
 k
    
    Lease payments, stipulated loss payments, payments for exercise of
purchase options and Return Adjustment Fees related to Toshiba Tranche 1 and
Toshiba Tranche 2 shall be remitted to the following account of the Toshiba Borrower
in cash or by credit pursuant to assignment of payment receipt stipulated in
Article 7, Paragraph 4 (Lessee shall bear the bank remittance fee).[*]
[*]
[*]
[*]
 
 *
    
    Indicates that certain information
contained herein has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to
the omitted portions. - 47 -




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(2)
    
    Other monies, or in the event that proxy receipt for each Borrower stipulated in
Article 7, Paragraph 4 is cancelled, shall be remitted into the account of each Lessor or
each Lender in cash or by credit (Lessee shall bear the bank remittance fee).[*]
[*]
[*]
[*][*]
[*]
[*]
[*][*]
[*]
[*]
[*][*]
[*]
[*]
[*]
 
 *
    
    Indicates that certain information
contained herein has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to
the omitted portions. - 48 -




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[*]
[*]
[*]
[*][*]
[*]
[*]
[*][*]
[*]
[*]
[*][*]
[*]
[*]
[*][*]
[*]
[*]
[*][*]
[*]
[*]
 
 *
    
    Indicates that certain information
contained herein has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to
the omitted portions. - 49 -




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[*]
[*]
[*]
[*][*]
[*]
[*]
[*][*]
[*]
[*]
[*][*]
[*]
[*]
[*]
 11
    
    The Lenders
              
 *
    
    Indicates that certain information
contained herein has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to
the omitted portions. - 50 -




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12
    
    The Borrowers
     13
    
    The Guarantors
     14
    
    The Administrative Custodian
  15
    
    Transaction structure
 (1)
    
    Lessor shall purchase from Lessee each unit component in each individual
transaction on the delivery date pursuant to the Sales and Purchase Agreement and
obtain the ownership thereof. The SD Lessor and the Toshiba Lessor share the
ownership of the Property in a ratio of 1:1.(2)
    
    Pursuant to the SD Sale and Purchase Agreement regarding Master
Receivables, the SD Lessor shall sell to the SD Borrower, at its own election and
discretion, the obligations related to SD Tranche 1 due under this Agreement on each
delivery date in order to raise an amount equivalent to about [*]%
of the property purchase price.(3)
    
    Pursuant to the Toshiba Sale and Purchase Agreement regarding Master
Receivables, the Toshiba Lessor shall sell to the Toshiba Borrower, at its own
election and discretion, the obligations related to Toshiba Tranche 1 due under this
Agreement on
 
 *
    
    Indicates that certain information
contained herein has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to
the omitted portions. - 51 -




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each delivery date in order to raise an amount equivalent to about [*]% of the
property purchase price.(4)
    
    To raise funds to purchase receivables/obligations, pursuant to the SD
Loan Agreement, the SD Borrower shall, at its own election and discretion, receive
financing from the SD Lenders on each delivery date.(5)
    
    To raise funds to purchase receivables/obligations, pursuant to the
Toshiba Loan Agreement, the Toshiba Borrower shall, at its own option and
discretion, receive financing from the Toshiba Lenders on each delivery date.(6)
    
    The SD Lessor and the Toshiba Lessor shall each raise an amount
equivalent to about [*]% of the property price from their own funds.(7)
    
    Lessor shall lease to Lessee the relevant unit component part on each
delivery date pursuant to this Agreement. The ratio of obligations with respect to
SD Tranche 1 and Toshiba Tranche 1 and with respect to SD Tranche 2 and Toshiba
Tranche 2 shall be 1 to 1, respectively.
 
 *
    
    Indicates that certain information
contained herein has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to
the omitted portions. - 52 -




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Loan Certificate
 
 
  1
    
    Our company hereby prepares and delivers to your company this Loan Certificate to certify the
receipt of the property indicated below pursuant to the Basic Lease
Contract of June 20,
2006 executed between our company and your companies.2
    
    Our company confirms that, with respect to each individual transaction subject to this Loan
Certificate, its delivery date, lease period, the share of each Tranche, each amount of lease
payments, payment for exercise of purchase options, Return Adjustment Fee, repayment standard
fee and stipulated loss payment stipulated in Items 1, 2, 3, 6, 7, 8 and 9 of Attachment 1 of
Basic Lease Contract after being agreed upon pursuant to
Article 4, Item 3 of Basic Lease Contract, are as follows and provided in Attachment 2 to this Loan Certificate.3
    
    Our company approves that all of the provisions of Basic
Lease Contract, provided in Item
1, apply to each individual transaction subject to this Loan Certificate.1
    
    Property loanedProperty specifications
          : see Attachment 12
    
    Delivery date       : (Month) (Day), 200Lease period : [years ][months]from the date of delivery3
    
    Place of delivery
          : [800 Yamano-Issiki-cho, Yokkaichi City, Mie Prefecture]
 - 53 -




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- 54 -




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SD Tranche 1
    
    [*]SD Tranche 2
    
    [*]Toshiba Tranche 1
    
    [*]Toshiba Tranche 2
    
    [*]
  [*] 
 
 *
    
    Indicates that certain information
contained herein has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to
the omitted portions. - 55 -




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[*]
   [*]
 
 *
    
    Indicates that certain information
contained herein has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to
the omitted portions. - 56 -




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[*]
  [*]
 
 *
    
    Indicates that certain information
contained herein has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to
the omitted portions. - 57 -




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*
 
 *
    
    Indicates that certain information
contained herein has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to
the omitted portions. - 58 -




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(a)
    
    Liens existing on the date hereof and Liens securing
refinancing indebtedness in respect of secured indebtedness;(b)
    
    Indebtedness represented by F, F&E Financing
Agreements and/or Capitalized Lease Obligations by secured by the assets
acquired pursuant to the respective capital lease (in the case of
Capitalized Lease Obligations) or with the proceeds of the respective F,
F&E Financing Agreements, so long as such Liens do not extend to any other
assets;(c)
    
    Working Capital Indebtedness up to 50% of SanDisks
and its Subsidiaries accounts receivable and inventory balances (and
refinancings thereof) may be secured by the assets of SanDisk and its
Subsidiaries;(d)
    
    any Lien arising by reason of (i) any judgment,
decree or order of any court, so long as such Lien is adequately bonded
and any appropriate legal proceedings which may have been duly initiated
for the review of such judgment, decree or order shall not have been
finally terminated or the period within which such proceedings may be
initiated shall not have expired; (ii) security for payment of workmens
compensation or other insurance; (iii) good faith deposits in connection
with tenders, leases and contracts (other than contracts for the payment
of money); and (iv) deposits to secure, or guarantees of, public,
governmental or statutory obligations, or in lieu of surety or appeal
bonds;(e)
    
    Liens for taxes, assessments of other governmental
charges not yet due or which are being contested in good faith and by
appropriate proceedings by SanDisk or any of its Subsidiaries if adequate
reserves with respect thereto are maintained on the books of SanDisk or
any of its Subsidiaries, as the case may be, in accordance with GAAP;(f)
    
    purchase money security interests arising in the
ordinary course of business securing only the assets so acquired;(g)
    
    statutory Liens of carriers, warehousemen, mechanics,
landlords, laborers, materialmen, repairmen or other like Liens arising by
operation of law in the ordinary course of business and consistent with
industry practices and Liens on deposits made to obtain the release of
such Liens if (i) the underlying obligations are not overdue for a period
of more than 60 days or (ii) such Liens are being contested in good faith
and by appropriate proceedings by
 - 59 -




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SanDisk or any of its Subsidiaries and adequate reserves with respect
thereto are maintained on the books of SanDisk or any of its Subsidiaries,
as the case may be, in accordance with GAAP;(h)
    
    Easements, rights-of-way, zoning and similar
restrictions and other similar encumbrances or title defects, which, if
they are incurred by SanDisk or any of its Subsidiaries after it acquires
the property subject thereto, are incurred in the ordinary course of
business and consistent with industry practices which, individually or in
the aggregate, do not materially detract from the value of the property
subject thereto (as such property is used or proposed to be used by
SanDisk or any of its Subsidiaries) or interfere with the ordinary conduct
of the business of SanDisk or any of its Subsidiaries, provided, that any
such Liens are not incurred in connection with any borrowing of money or
any commitment to loan any money or to extend any credit;(i)
    
    Liens that secure Acquired Indebtedness (and
refinancings thereof), provided, in each case, that such Liens do not
secure any property or assets other than the property or asset so
acquired;(j)
    
    leases or subleases granted to other persons not
materially interfering with the conduct of the business of SanDisk or any
of its Subsidiaries or materially detracting from the value of the
relative assets of SanDisk or such Subsidiary;(k)
    
    Liens arising from precautionary Uniform Commercial
Code financing statement filings regarding operating leases entered into
by SanDisk or any of its Subsidiaries;(l)
    
    A notice of intention filed by a mechanic,
materialman, or laborer under applicable mechanics lien law, or a
building contract filed by a contractor or subcontractor thereunder; and(m)
    
    Other Liens as SanDisk and the Lessors may agree upon
from time to time.
     - 60 -




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(a)
    
    Security interests/liens existing at the execution of
this Agreement and security interests/liens to guarantee refinancing debt
related to the secured debt.(b)
    
    Security interests/liens established by an agreement
to establish security interest and obtain operating assets (an agreement
to obtain (including purchases and/or leases) operating assets after the
execution of this Agreement in order to implement or develop each
enterprise of SanDisk or affiliated companies ((i) any company owned
directly or indirectly at that time by SanDisk through ownership of a
majority of the voting shares (shares which have been issued by that time
and which grant in the ordinary course of business the right to select
directors and similar positions of the issuer) by SanDisk alone, or by
SanDisk and an affiliated company, or by a SanDisk affiliated company
alone, (ii) any entity (excluding a corporation) in which SanDisk
independently, or SanDisk and its affiliated company, or a SanDisk
affiliated company alone owns a majority interest directly or indirectly
on the date of decision, or (iii) any partnership in which SanDisk or a
SanDisk affiliated company is a general partner and owns a majority
interest; similarly
throughout this Article) executed to establish a security interest in those
operating assets for the purpose of securing payment of the price of those
 - 61 -




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assets), as well as security interests established in assets obtained
pursuant to a capital lease (a lease or other financing required by SanDisk
or an affiliated company under U.S. accounting standards (GAAP) for
capitalization; similarly below) to secure the payment of the price of
those assets.(c)
    
    Security interests/liens established in the assets of
SanDisk or its affiliated companies to secure accounts receivables or
inventory balances and financings thereof up to 50 percent of working
capital debt (debt borrowed under a credit facility available for use by
SanDisk or its affiliated companies, which is used for working capital or
some similar purpose) .(d)
    
    (i) Security interests/liens arising by reason of
court judgment, decision, or order (provided, however, that this shall
only apply if a bond sufficient for purposes of appealing such judgment,
decision, or order has been paid, and all legal procedures properly
instituted for the review of such judgment, decision, or order have not
been terminated, or the period within which such procedures may be
initiated has not expired); (ii) security interests to guarantee payment
of workers compensation insurance and other insurance; (iii) good-faith
deposit monies for deposits related to tenders, leases, and contracts
(excluding contracts for payment of money); and (4) deposits to secure a
public, government, or legal obligations, or appeal bonds.(e)
    
    Security interests to secure payable taxes, public
charges, and other governmental levies that are not yet due, and security
interests to secure taxes, public charges, and other governmental levies
that SanDisk or its affiliated companies are contested in court in good
faith and by appropriate procedures. Provided, however, that this shall
be limited to cases in which SanDisk or its affiliated companies have set
aside sufficient reserves on its books for these charges as appropriate
pursuant to GAAP.(f)
    
    Purchase money security interests arising in the
ordinary course of business. Provided, however, that this shall be
limited to assets acquired therein.(g)
    
    Judicial liens for carriers, warehousemen, workmen,
landlords, laborers, material suppliers, and mechanics and other similar
liens arising by operation of law in the ordinary course of business and
consistent with standard industry practices, and any security interests on
deposits to release any of these liens. Provided, however, that this
shall be limited to situations (i) within 60 days since the payment of the
underlying indebtedness has become due, or (ii) such lien is contested in
good faith and according to the
appropriate procedures by SanDisk or its affiliated companies and SanDisk
 - 62 -




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or its affiliated companies have set aside sufficient reserves on their
books for these charges as appropriate pursuant to GAAP.(h)
    
    Easements, limitations on use, or other limitations
or similar encumbrances or title defects that are incurred by SanDisk or
its affiliated companies after it acquired the property subject thereto in
the ordinary course of business in a manner consistent with industry
practices and do not, whether in whole or in part, reduce the actual value
of the property and do not interfere with the ordinary operations of
SanDisk or its affiliated companies. Provided, however, that these
security interests are not incurred in connection with any borrowing of
money, any commitment to loan money or extending credit.(i)
    
    Security interests to secure acquired debt or
financings thereof ((i) debt existing at a time of any person who has
become a SanDisk affiliated company, or is merged with SanDisk or its
affiliated company, or (ii) debt assumed in connection with the
acquisition of assets from some person). Provided, however, that these
security interests shall be limited to those established in the assets
acquired.(j)
    
    A lease or sublease of assets of SanDisk or its
affiliated companies not materially interfering with the ordinary
operations of SanDisk or its affiliated company. Provided, however, that
such lease or sublease does not reduce the actual value of such assets.(k)
    
    Security interests arising from precautionary Uniform
Commercial Code financing statement filings related to operating leases
entered into by SanDisk or its affiliated company(l)
    
    Security interests arising from filing a notice of
intention by a mechanic, material supplier, or laborer under applicable
mechanics lien law or a building contract filed by a contractor or
subcontractor thereunder
 - 63 -




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Certificate of Return
       1
    
    Property returnedProperty specifications
    
    : as listed in the attachment
 2
    
    Day of return
    
    : (Month) (Day), 200_3
    
    Place of return
    
    :
 - 64 -




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Certificate of Transfer
  
 1
    
    Transferee
    
    : Flash Partners Yugen Kaisha
 2
    
    Property specifications
    
    : as listed in the attachment
 
    - 65 -




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Conditions at the Time of Return
   *
    *
   
 *
    
    Indicates that certain information
contained herein has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to
the omitted portions. - 66 -




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*
 
 *
    
    Indicates that certain information
contained herein has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to
the omitted portions. - 67 -




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*
 * * *
 
 *
    
    Indicates that certain
information contained herein has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to the omitted portions. - 68 -




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Notification Address:
 
        
 *
    
    Indicates that certain information contained herein has been omitted and
filed separately with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions. - 69 -