**PATENT LICENSEAGREEMENT**

**THIS PATENT LICENSE AGREEMENT**(this "**Agreement**")is made as of July 15, 2003, between **TOSHIBA CORPORATION**, a Japanesecorporation, acting through its Semiconductor Company ("**Toshiba**"), and **M-SYSTEMSFLASH DISK PIONEERS LIMITED**, an Israeli corporation ("**M-Systems**").  Toshibaand M-Systems are also hereinafter referred to collectively as the "**Parties**"and each individually as a "**Party**".

**RECITALS**

A.        Each Party owns or controls and may in thefuture own or control, and has and may in the future have rights under, variouspatents and utility models and applications therefor in various countries ofthe world; and

B.         Each Party desires to acquire licenses undersuch patents and utility models and applications therefor of the other Party onthe terms and conditions set forth herein.

**NOW, THEREFORE**, for good and valuableconsideration, the receipt and adequacy of which are hereby acknowledged, theParties agree as follows:

 

**AGREEMENT**

1.*                 *Definitions.

Certain capitalized terms used in this Agreement shallhave the meanings set forth for such terms in the body of this Agreement or inthe attached Annex I.

2.*                 *Grants of Licenses.

2.1*             *M-Systems License.  Subject to the terms andconditions of this Agreement, M-Systems (on behalf of itself and itsSubsidiaries) hereby grants to Toshiba, during the term of this Agreement, anonexclusive, worldwide, royalty-free and fully paid-up license under theM-Systems Licensed Patents to make, have made, use, sell, offer tosell, import and otherwise dispose of any Toshiba Licensed Products.

2.2*             *Toshiba License.  Subject to the terms and conditions of this Agreement,Toshiba (on behalf of itself and its Subsidiaries) hereby grants to M-Systems,during the term of this Agreement, a nonexclusive, worldwide, royalty-free andfully paid-up license under the Toshiba Licensed Patents: 

(a)*   *to make, have made, use, sell, offer to sell, import andotherwise dispose of any M-Systems Licensed Products;

(b)*  *toincorporate into M-Systems Licensed Products any Semiconductor Devicespurchased or otherwise rightfully acquired from Toshiba or any third party;

 

**_1_** 

 

(c)*   *to have any Semiconductor Devices made by a third-partymanufacturer (in each case the identity of which shall be provided in writingby M-Systems to Toshiba prior to the initial manufacturing of suchSemiconductor Devices) solely in accordance with unique designs and/orspecifications originating with M-Systems, provided that such license shall notinclude the right to have made any monolithic Semiconductor Devices embeddingor incorporating flash memory cells (including, without limitation, NAND flashmemory dies); and  

(d)*  *without derogating from Section 2.2(a) above, to use, sell, offer to sell, import and otherwisedispose of M-Systems Licensed Products which incorporate any SemiconductorDevices or any products made under Section 2.2(c) (subject to the limitationsset forth in such Section 2.2(c)). 

2.3*             *Application of Immunity.  The license by eachParty (as Licensor Party) to the other Party (as Licensee Party) as set forthin Section 2.1 and Section 2.2  shall constitute a grant of immunity against anyclaim or action for infringement (whether direct or contributory infringement,inducement to infringe, or otherwise) against the Licensee Party`sdistributors, resellers, customers and users, provided that the immunity shallapply only with respect to Licensed Products sold or otherwise disposed of bythe Licensee Party (whether used alone, or as used with other products orcomponents, where there is no substantial noninfringing use of such LicensedProducts in the absence of use with such products or components).

3.*                 *Releases.

3.1*             *M-Systems Release. M-Systems, on behalf of itself and its Subsidiaries, herebyirrevocably releases Toshiba and its Subsidiaries, distributors, resellers,customers and users from any and all claims of infringement of any M-SystemsLicensed Patents, which claims have been made or which might be made at anytime, in connection with any Toshiba Licensed Product made, had made, used,sold, offered for sale, imported or otherwise disposed of by Toshiba or itsSubsidiaries prior to the Effective Date, to the extent that such making,having made, use, sale, offering for sale, transfer, importation or otherdisposition would have been licensed, or immunized pursuant to Section 2.3, hereunder had it occurred after theEffective Date.

3.2*             *Toshiba Release.  Toshiba, on behalf of itself and its Subsidiaries,hereby irrevocably releases M-Systems and its Subsidiaries, distributors,resellers, customers and users from any and all claims of infringement of anyToshiba Licensed Patents, which claims have been made or which might be made atany time, in connection with any M-Systems Licensed Product made, had made,used, sold, offered for sale, imported or otherwise disposed of by M-Systems orits Subsidiaries, or any Semiconductor Device had made by M-Systems, prior tothe Effective Date, to the extent that such making, having made, use, sale,offering for sale, transfer, importation or other disposition would have beenlicensed, or immunized pursuant to Section 2.3, hereunder had it occurred after theEffective Date. 

 

**_2_** 

 

3.3*             *Effect of Assignment.  The releases granted pursuantto Section 3.1 and Section 3.2 shall apply to and be binding on any assignees or othertransferees of any of the Licensed Patents.  To the extent that suchreleases may not automatically be binding on any such assignees or othertransferees, the transferring Party shall cause such releases to be so bindingand shall indemnify and hold harmless the other Party from and against alldamages, costs and other liabilities (including reasonable attorneys` fees)incurred by such Party and its sublicensed Subsidiaries that result from orrelate to any failure to cause such releases to be so binding.

4.*                 *Right to Sublicense.

4.1*             *Sublicenses to Subsidiaries.  Each Party (asLicensee Party) shall have the right to grant sublicenses under the licensesgranted to it pursuant to Section 2 (excluding the licenses granted toM-Systems pursuant to Section 2.2(c), Section 2.2(d) and Section 2.2(d)) to any of its Subsidiaries without any payment obligationby such Party or such Subsidiary, provided that all applicable terms andconditions of this Agreement are binding on such Subsidiaries to the sameextent as this Agreement applies such terms and conditions to the LicenseeParty.  The Parties acknowledge and agree that no writtenintra-corporate agreements or other formalities are required for the grantingof such sublicenses to Subsidiaries, provided that such entities meet therequirements for Subsidiaries set forth in this Agreement and are bound by thisAgreement in accordance with the foregoing.

4.2*             *Effect of Ceasing to Be a Subsidiary.  Theextension to a Subsidiary of any licenses under this Agreement shall apply onlyduring the time period during which such entity meets all the requirements ofthe definition of "Subsidiary" under this Agreement, and the sublicensesgranted to any such entity shall terminate immediately when such entity ceasesto be a Subsidiary.  For purposes of clarification, the Partiesacknowledge and agree that termination of the licenses granted to any suchentity that has ceased to be a Subsidiary shall not affect the continuation ofthe licenses and releases granted by such entity (on behalf of itself and itsSubsidiaries) to the other Party (as Licensee Party) with respect to allPatents of such entity (including its Subsidiaries) that, if held by M-Systemsor Toshiba at any time during the term of this Agreement, would constituteLicensed Patents of M-Systems or Toshiba (except for Post-Subsidiary PeriodPatents), which licenses and releases shall remain in effect in accordance withthe terms of this Agreement even after such entity ceases to be a Subsidiary.

4.3*             *No Other Sublicenses.  Neither Party shall havethe right to grant sublicenses of, or otherwise extend any licenses,immunities, releases or other grants of rights under, the rights granted tosuch Party pursuant to this Agreement, except as otherwise expressly providedin this Section 4.  In addition, no sublicensed Subsidiary shall havethe right to grant further sublicenses of, or otherwise further extend, anylicenses, immunities, releases or other rights under this Agreement or anysublicense permitted hereunder.  

 

**_3_** 

 

5.*                 *Application of Agreement.

Without limitation of the generality of the definitionof Licensed Patents, each of M-Systems and Toshiba (as Licensor Party)acknowledges and agrees that the licenses set forth in Section 2 and thereleases set forth in Section 3 shall automatically be binding on allof such Party`s Subsidiaries, such that all such Subsidiaries of a Party havegranted and will grant to the other Party (as Licensee Party) licenses andreleases of the scope contemplated by this Agreement under all Patents of suchSubsidiaries that, if held by M-Systems or Toshiba at any time during the termof this Agreement, would constitute Licensed Patents, except that Patentsacquired by a Subsidiary after such Subsidiary ceases to be a Subsidiary andissued Patents that are issued in respect of applications filed by a Subsidiary(and having a first priority date) after such Subsidiary ceases to be aSubsidiary ("**Post-Subsidiary Period Patents**") shall not be included inthe licenses or releases granted to the other Party (as Licensee Party).  Tothe extent that this Agreement is not automatically binding on any suchSubsidiaries, each Party (as Licensor Party) shall (a) cause its Subsidiariesto grant licenses and releases of the scope contemplated by this Agreement withrespect to such Subsidiaries` Patents (other than Post-Subsidiary PeriodPatents), and to be bound by the terms and conditions of this Agreementapplicable to Subsidiaries, to the same extent as if such Subsidiaries wereparties hereto, and (b) indemnify and hold harmless the other Party (asLicensee Party) from and against all damages, costs and other liabilities(including reasonable attorneys` fees) incurred by the Licensee Party and itssublicensed Subsidiaries that result from or relate to any failure to cause thegranting of any licenses and releases of the scope contemplated by thisAgreement with respect to any such Patents.

6.*                 *No Assignment.

This Agreement shall be binding upon and inure to thebenefit of and be enforceable by the respective successors and permittedassigns of the Parties.  No Party may assign this Agreement or itsrights hereunder to any Person without the written consent of the other Party.  Noassignment by any Party of this Agreement or of any of such Party`s rightshereunder (as agreed to by the other Party) shall release such assigning Partyfrom any of its obligations hereunder.  Any attempted assignment ofthis Agreement in violation of this Section 6 shall be void and of no effect.

7.*                 *Extension to Acquired Operation.

In the event of an Acquisition byM-Systems or Toshiba (in such capacity, an "**Acquiring Party**", with theother Party being a "**Non-Acquiring Party**"), the applicable AcquiredOperation shall be subject to the terms and conditions, and shall have thebenefits, of this Agreement to the same extent as any other entity to whichthis Agreement is applicable (*e.g.*, to the same extent as applicable tothe Acquiring Party itself if such Acquired Operation becomes a part of theAcquiring Party and to the same extent as applicable to a Subsidiary if suchAcquired Operation meets the requirements of the definition of "Subsidiary"pursuant to this Agreement), provided that the Acquired Operation will have thebenefits of this Agreement only if the Acquired Operation is bound by all theprovisions of this Agreement applicable to a Party or Subsidiary, as the casemay be (including Section 2 and Section 3).  

**_4_** 

 

8.*                 *Representations and Warranties of the Parties.

Each Party hereby represents and warrants to the otherParty as follows:

8.1*             *Organization and Standing.  Such Party is dulyorganized and validly existing under the laws of the jurisdiction of itsorganization.  

8.2*             *Authority; Validity.  Such Party has allrequisite organizational power and organizational authority to enter into andperform its obligations under this Agreement.  The execution,delivery and performance by such Party of this Agreement has been dulyauthorized by all necessary corporate action.  This Agreement hasbeen duly executed and delivered by such Party.  This Agreementconstitutes the legal, valid and binding obligation of such Party, enforceableagainst such Party in accordance with its terms.

8.3*             *No Conflicts.  The execution and delivery bysuch Party of this Agreement does not, and the performance by such Party of itsobligations hereunder will not, conflict with, result in any violation of ordefault (with or without notice or lapse of time or both) under, or give riseto a right of termination, cancellation or acceleration of any obligation (ineach case by any third party) or to the loss of any benefit by such Partyunder, (a) its organizational documents or (b) any judgment,injunction, applicable law, contract, agreement or Approval to which such Partyis a party or by which such Party is bound, except for such matters that,individually or in the aggregate, would not have a material adverse effect onsuch Party`s performance of its obligations under this Agreement.  

8.4*             *Approvals.  No Approval of any Person isrequired to be obtained or made by such Party in connection with the execution,delivery and performance of this Agreement and the consummation of thetransactions contemplated hereby, except for Approvals the absence of which,individually or in the aggregate, would not have a material adverse effect onsuch Party`s performance of its obligations under this Agreement.

8.5*             *Proceedings.  There are no pending or, to suchParty`s knowledge, threatened Proceedings against or relating to such Party that,individually or in the aggregate, would reasonably be expected to have amaterial adverse effect on such Party`s performance of its obligations underthis Agreement.

8.6*             *Toshiba Licensed Patents.  

(a)*   *Toshiba represents and warrants that, to the best of itsknowledge, as of the Effective Date and during the term of this Agreement, allPatents entitled to effective filing dates prior to the Cut-Off Date and ownedby Toshiba that relate primarily to Semiconductor Devices are and will beallocated to TSC, or are or will be owned or controlled by TSC and/or TSC`sSubsidiaries.  

 

 

 

**_5_** 

 

(b)*  *In theevent of the discovery of any Patent entitled to an effective filing date priorto the Cut-Off Date and owned by Toshiba that primarily relates toSemiconductor Devices but that is not allocated to TSC or owned or controlledby TSC or a Subsidiary of TSC, Toshiba shall release M-Systems and itsSubsidiaries from any claims that M-Systems Licensed Products or M-Systems`Semiconductor Devices infringe such Patent, solely to the extent that suchM-Systems Licensed Products and M-Systems` Semiconductor Devices would havebeen non-infringing if the applicable Patent had been included in the ToshibaLicensed Patents for the purposes of the licenses granted to M-Systems under Section 2.2.  

9.*                 *Term; Effect of [***] and XDOC Product SupplyTerminations.

9.1*             *Term.  Subject to Section 9.2 and Section 9.3, this Agreement shall become effectiveon the Effective Date and shall remain in full force and effect until theexpiration of the last to expire of any Licensed Patents.

9.2*             *Effect of Termination of the [***].  

(a)*   *Subject to Section 9.2(b), if the [***] is terminated pursuantto [***] thereof, then the license rights and the releases granted to theBreaching Party under any USB‐Related Patents pursuant to this Agreementshall, at the sole discretion of the Breaching Party, either (i) continue infull force and effect, subject to and contingent upon the amended terms andconditions set forth on Schedule 9.2(a) or as otherwise mutually agreed by the Parties, or (ii)terminate and be of no further force and effect (without affecting the otherlicenses or any releases granted to the Breaching Party hereunder or any of thelicenses or releases granted to the non Breaching Party hereunder).

(b)*  *Notwithstanding Section 9.2(a), if (i) the [***] is terminatedpursuant to [***] thereof and (ii) the Special Conditions have been determinedto be satisfied pursuant to the final arbitration decision providing for suchtermination of the [***], then the license rights and the releases granted tothe Breaching Party under any USB‐Related Patents pursuant to thisAgreement shall immediately terminate (without affecting the other licenses orany releases granted to the Breaching Party hereunder or any of the licenses orreleases granted to the non Breaching Party hereunder).

(c)*   *Ifthe [***] is terminated by the [***] pursuant to [***], then the license rightsand the releases granted to the Parties under any USB‐Related Patentspursuant to this Agreement shall continue in full force and effect, subject toand contingent upon the amended terms and conditions set forth on Schedule 9.2(c) or as otherwise mutually agreed bythe Parties (without affecting the other licenses or any releases granted tothe Parties hereunder).  

(d)*  *If the[***] is terminated otherwise than as described in Section 9.2(a), Section 9.2(b) or Section 9.2(c), then such termination shall have no effect on thisAgreement or the licenses and releases granted hereunder.

 

**_6_** 

 

9.3*             *Effect of XDOC Product Supply Termination.

(a)*   *Subject to Section 9.3(b), if XDOC Product SupplyTermination occurs, then the license rights and the releases granted to theBreaching Party under any XDOC-Related Patents pursuant to this Agreementshall, at the sole discretion of the Breaching Party, either (i) continue infull force and effect, subject to and contingent upon the amended terms andconditions set forth on Schedule 9.3(a) or as otherwise mutually agreed bythe Parties, or (ii) terminate and be of no further force and effect (withoutaffecting the other licenses or any releases granted to the Breaching Partyhereunder or any of the licenses or releases granted to the non Breaching Partyhereunder).

(b)*  *Notwithstanding Section 9.3(a), if (i) XDOC Product SupplyTermination occurs and (ii) the Special Conditions have been determined to besatisfied pursuant to the final arbitration decision providing for such XDOCProduct Supply Termination, then the license rights and the releases granted tothe Breaching Party under any XDOC‐Related Patents pursuant to thisAgreement shall immediately terminate (without affecting the other licenses orany releases granted to the Breaching Party hereunder or any of the licenses orreleases granted to the non Breaching Party hereunder).

(c)*   *If XDOC Product Supply Termination occurs otherwise thandescribed in Section 9.3(a) or Section 9.3(b), then such termination shall have no effect on thisAgreement or the licenses and releases granted hereunder.

9.4*             *Royalty Exclusion.  In no event shall anyroyalties or Support Fees (as defined in Section 4.7.1 of the XDOC D&LAgreement) be due to a Party pursuant to the XDOC D&L Agreement withrespect to any products that are subject to royalty payment obligations on thepart of the other Party pursuant to the terms of this Agreement (including, butnot limited to, Section 9.2 or Section 9.3 hereof). 

10.*             *Miscellaneous.  

10.1*         *No Implied Warranties, Etc.  Nothing containedin this Agreement shall be construed as:

(a)*   *awarranty or representation by either of the Parties as to the validity or scopeof any Licensed Patents; or

(b)*  *conferringupon either Party or its Subsidiaries any license, immunity, release or otherright under any Patents, except the licenses, immunities, releases and otherrights expressly granted hereunder; or  

(c)*   *awarranty or representation that any acts licensed or immunized hereunder willbe free from infringement of Patents, other than those under which licenses,immunities and other rights have been granted hereunder; or

(d)*  *anagreement to bring or prosecute actions or suits against third parties forinfringement or agreement conferring any right to bring or prosecute actions orsuits against third parties for infringement; or

**_7_** 

 

(e)*   *conferringany right to use, in advertising, publicity, or otherwise, any trademark ortrade name, or any contraction, abbreviation or simulation thereof, of eitherParty; or 

(f)*    *an obligation to furnish any technical information or know-how.

10.2*         *No Implied Licenses.  Each Party hereby retainsall rights not expressly granted by this Agreement.  To the fullestextent permitted by applicable law, each Party hereby disclaims any and allimplied licenses, immunities, releases and other rights.  Inaddition, this Agreement provides no licenses, immunities, releases or otherrights to either Party under any trademarks or trade names, copyrights, maskwork rights or trade secrets.

10.3*         *Confidentiality; Publicity.

(a)*   *ConfidentialInformation.  "Confidential Information" means, subject to thelimitations set forth in Section 10.3(c), (i) any information of a Partywith respect to which the other Party has a confidentiality obligation as ofthe date hereof pursuant to the express terms of a written confidentiality ornondisclosure agreement between the Parties, (ii) any informationregarding the disclosing Party or its business, including information whichrelates to research, product plans, designs, patents, trademarks, tradesecrets, know-how, products, pricing, services, customers, markets, forecasts,marketing or finance, which is (1) in written or other tangible form and markedwith a legend which identifies the information as confidential, or (2) in oralor visual form, identified as being confidential at the time of disclosure andthereafter summarized in a writing which identifies the information asconfidential and is transmitted to the receiving Party within thirty (30) daysafter such oral or visual disclosure.

(b)*  *Confidentiality Obligation. During the a period of eight (8)years after receipt of any Confidential Information, each Party agrees(i) to protect all such Confidential Information received by such Partyand not to disclose such Confidential Information to any person or entity("Person"), utilizing the same degree of care the receiving Party utilizes toprotect its own confidential information of a similar nature (and in no eventless than reasonable care), and (ii) not to utilize such ConfidentialInformation for any purpose other than in connection with the activitiescontemplated by this Agreement.  Notwithstanding anything to thecontrary in the foregoing, each Party may disclose Confidential Information toany employee, agent or representative who has a "need to know" such informationfor the purposes of this Agreement, provided that such Person(s) shall benotified that such disclosure is made and shall be kept in confidence.

(c)*   *Exceptions.  Notwithstanding the provisions of Section 10.3(a),neither Party shall have any obligation to maintain the confidentiality of anyinformation, and Confidential Information shall not include any information,that (i) is or becomes generally available in the public domain other thanas a result of disclosure by the receiving Party (or any third party under aduty of confidentiality to the disclosing Party), (ii) was known by thereceiving Party prior to disclosure by the disclosing Party, as can beevidenced by written documents existing at the time of initial disclosure,(iii) was independently developed by the receiving Party without use of orreference to such information, as can be evidenced by written documents, or(iv) was received by the receiving Party from another Person withoutviolation of any confidentiality obligations.

**_8_** 

 

(d)*  *Ownership.  AllConfidential Information shall remain the sole property of the disclosingParty.  No receiving Party shall have any rights to the ConfidentialInformation of the disclosing Party other than as expressly set forth inthis Agreement.

(e)*   *Disposal of Confidential Information.  Withinthirty (30) days of the termination of this Agreement, or at any time upon theapplicable disclosing Party`s request, the receiving Party shall return to thedisclosing Party or destroy all Confidential Information (including copies andelectronic records thereof).  

(f)*    *Publicity.  Subject to applicable law and theapplicable rules or regulations of any stock exchange on which the securitiesof either Party are traded, no Party shall issue any press release, publicitystatement, communication with stockholders, public notice or other publicdisclosure relating directly to this Agreement or the transactions contemplatedhereby without prior notice to, consultation with, and the consent of the otherParty.  The Parties shall issue a joint press release withrespect to the transactions under this Agreement and certain other relatedagreements entered into between the Parties as of the Effective Date, in formto be mutually agreed by the Parties, shortly after the Effective Date of thisAgreement. 

10.4*         *Governing Law.  This Agreement shall beconstrued and interpreted in accordance with and governed by the laws of theState of New York, U.S.A. (without regard to the choice of law provisionsthereof).  The Parties agree and consent that services of process maybe made upon the Parties in any Proceedings relating hereto by any meansallowed under applicable law.

10.5*         *Dispute Resolution.

(a)*   *TheParties intend that all disputes between the Parties arising out of thisAgreement shall be settled by the Parties amicably through good faithdiscussions upon the written request of either Party. In the event that anysuch dispute cannot be resolved thereby within a period of sixty (60) daysafter such notice has been given, such dispute shall be finally settled bybinding arbitration at the request of either Party.

(b)*  *Eacharbitration hereunder shall be conducted in the English language in New York,New York, U.S.A. in accordance with the Commercial Arbitration Rules of theAmerican Arbitration Association then in effect (the "Rules").  However,in all events, these arbitration provisions shall govern over any conflictingrules that may now or hereafter be contained in the Rules.  EachParty may demand arbitration by filing a written demand with the other Partywithin one hundred twenty (120) days after the expiration of the sixty (60) dayperiod described above.  Each Party shall select one (1) arbitrator andthe two (2) arbitrators selected by the Parties shall jointly select a thirdarbitrator, which arbitrators shall conduct the arbitration of such dispute.  Inthe event the two (2) arbitrators are unable to select a third arbitrator, suchselection shall be made pursuant to the Rules.  Judgment upon anaward rendered in an arbitration hereunder may be entered in any court havingjurisdiction or application may be made to such court for judicial acceptanceof any award and an order of enforcement, as the case may be.  Thearbitrators shall have the authority to grant any equitable and legal remediesthat would be available in any judicial proceeding intended to resolve adispute.

**_9_** 

  Thearbitrators shall also have the authority to allocate between the Parties thecosts of the arbitration in such equitable manner as the arbitrators maydetermine.  The prevailing Party in the arbitration shall be entitledto receive reimbursement of its reasonable expenses incurred in connectiontherewith.  Notwithstanding the foregoing, either Party shall beentitled to seek preliminary injunctive relief from any court of competentjurisdiction, pending the final decision or award of the arbitrators.  Theaward rendered in an arbitration hereunder shall be final and non‐appealable.  

10.6*         *Notices and Other Communications.  Any and allnotices, requests, demands and other communications required or otherwisecontemplated to be made under this Agreement shall be in writing and in theEnglish language and shall be provided by one or more of the following meansand shall be deemed to have been duly given (i) if delivered personally,when received, (ii) if transmitted by facsimile, on the first (1st)Business Day following receipt of a transmittal confirmation, or (iii) ifby international courier service, on the fourth (4th) Business Day followingthe date of deposit with such courier service, or such earlier delivery date asmay be confirmed in writing to the sender by such courier service.  Allsuch notices, requests, demands and other communications shall be addressed asfollows:

## If to Toshiba:Toshiba Corporation1-1 Shibaura 1- chome, Minato-ku,   Tokyo 105-8001  JapanAttention:          General Manager                        Legal Affairs and Contracts Division                        Semiconductor Company                      Telephone:        +81-3-3457-3452Facsimile:         +81-3-5444-9342

## If to M-Systems:General Counsel; and 

## VP Corporate Development andLegal AffairsM-Systems Flash Disk Pioneers Limited7 Atir Yeda St. Kfar Saba, 44425, IsraelTelephone:        +972-9-764-5000Facsimile:         +972-3-548-8666

## orto such other address or facsimile number as a Party may have specified to theother Party in writing delivered in accordance with this Section 10.6.

10.7*         *Severability.  If any provision of thisAgreement shall be held to be illegal, invalid or unenforceable, the Partiesagree that such provision will be enforced to the maximum extent permissible soas to effect the intent of the Parties, and the validity, legality andenforceability of the remaining provisions of this Agreement shall not in anyway be affected or impaired thereby.  If necessary to effect theintent of the Parties, the Parties will negotiate in good faith to amend thisAgreement to replace the unenforceable language with enforceable language whichas closely as possible reflects such intent.

**_10_** 

 

10.8*         *Amendments.  This Agreement may be amended ormodified only by a written instrument signed by each Party.

10.9*         *Waiver.  Any waiver by a Party of an instance ofthe other Party`s noncompliance with any obligation or responsibility hereincontained shall be in writing and signed by the waiving Party and shall not bedeemed a waiver of any other instance of the other Party`s noncompliancehereunder.

10.10*     *No Third-Party Beneficiaries.  The terms andprovisions of this Agreement are intended solely for the benefit of the Partiesand their respective successors and permitted assigns, and the parties do notintend to confer third-party beneficiary rights upon any other person.

10.11*     *Expenses.  Each Party shall bear all of itsout-of-pocket costs and expenses incurred in connection with the negotiationand execution of this Agreement. 

10.12*     *Construction.  This Agreement has beennegotiated by the Parties and their respective counsel and shall be fairlyinterpreted in accordance with its terms and without any strict construction infavor of or against any Party.

10.13*     *Interpretation and Construction of this Agreement.  Unlessthe context shall otherwise require, any pronoun shall include thecorresponding masculine, feminine and neuter forms, and words using thesingular or plural number shall also include the plural or singular number,respectively.  The words "include," "includes" and "including" shallbe deemed to be followed by the phrase "without limitation".  Allreferences herein to Articles, Sections, Annexes, Exhibits and Schedules shallbe deemed to be references to Articles and Sections of, and Annexes, Exhibitsand Schedules to, this Agreement unless the context shall otherwise require.  AllExhibits and Schedules attached hereto are hereby incorporated by referenceinto, and made a part of, this Agreement.  The headings of theArticles and Sections hereof are inserted for convenience of reference only andare not intended to be a part of, or to affect the meaning or interpretationof, this Agreement.  Unless the context shall otherwise require, anyreference to any agreement or other instrument or statute or regulation is tosuch agreement, instrument, statute or regulation as amended and supplementedfrom time to time (and, in the case of a statute or regulation, to anysuccessor provision).  Any reference in this Agreement to a "day" ora number of "days" (without the explicit qualification of "Business") shall beinterpreted as a reference to a calendar day or number of calendar days.  Ifany action or notice is to be taken or given on or by a particular calendarday, and such calendar day is not a Business Day, then such action or noticeshall be deferred until, or may be taken or given, on the next Business Day.

10.14*     *Language.  The Parties have negotiated thisAgreement in the English language, which shall be the governing language ofthis Agreement.

10.15*     *Specific Performance.  The Parties agree thateach other Party shall be entitled to obtain an injunction or injunctions inaccordance with the dispute resolution procedures contained in Section 10.5to prevent breaches of the provisions of this Agreement or any agreementcontemplated hereunder, and to enforce specifically the terms and provisionshereof.

**_11_** 

 

10.16*     *Consequential and Other Damages.  In no eventshall either Party be liable with respect to this Agreement for any special,indirect, incidental, punitive or consequential damages of any kind, includingdamages to the other Party`s business reputation however caused, and on anytheory of liability whether in an action for contract, strict liability or tort(including negligence) or otherwise, whether or not the first party has beenadvised of the possibility of such damages. 

10.17*     *Cumulative Remedies.  Except as otherwise expressly providedherein, any and all remedies herein expressly conferred upon a Party will bedeemed cumulative with, and not exclusive of, any other remedy conferred herebyor by Law or otherwise on such Party, and the exercise of any one remedy willnot preclude the exercise of any other remedy.

10.18*     *Relationship of the Parties.  Nothing containedin this Agreement is intended to, or shall be deemed to, create a partnershipamong the Parties for any purpose, including tax purposes.  Neitherof the Parties will take a position contrary to the foregoing.

10.19*     *Entire Agreement.  The provisions of this Agreementand the Exhibits and Schedules hereto set forth the entire agreement andunderstanding among the Parties as to the subject matter hereof and supersedeall prior agreements, oral or written, and all other prior communications amongthe Parties relating to the subject matter hereof.  

10.20*     *Counterparts.  This Agreement may be executed intwo or more counterparts, each of which shall be binding as of the date firstwritten above, and all of which shall constitute one and the same instrument.  Eachsuch counterpart shall be deemed an original, and it shall not be necessary inmaking proof of this Agreement to produce or account for more than one suchcounterpart.

10.21*     *Nature of Agreement.  This is a contract underwhich each Party is a licensor to the other Party of rights with respect to"intellectual property" within the scope of Section 101 of the U.S. BankruptcyCode, and, in the event of a case under the Bankruptcy Code involving a Party,the other Party shall have the right to exercise any and all rights describedin Section 365(n) of the Bankruptcy Code or in this Agreement, including theright to retain the rights (including its licenses and immunities) contemplatedhereby.

 

 

 

 

 

 

 

 

**_12_** 

**IN WITNESS WHEREOF**,the Parties have caused their respective duly authorized representatives toexecute this Patent License Agreement as of the Effective Date.

 
| **TOSHIBA CORPORATION**  By:       ____________________________            Name:            Title: | **M-SYSTEMS FLASH DISK PIONEERS LIMITED**  By:       ____________________________            Name:            Title: |
|----------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------|
|                                                                                               | ** **                                                                                                           |

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**_13_** 

**Annex 1**

## **Certain Definitions**

## "**AcquiredOperation**" shall mean an on‐going business or operation (whichbusiness or operation has products or services, or on-going activities todevelop products or services) which is acquired (or as to which Control isacquired) directly or indirectly by Toshiba or M-Systems (whether as assets oras an entity that becomes a Subsidiary).

## "**Acquisition**"shall mean any transaction or any series of transactions (whether a merger,acquisition of assets, acquisition of securities or otherwise) as a result ofwhich, directly or indirectly, either M-Systems or Toshiba acquires ownershipor Control of an Acquired Operation.

"**Approval**" means, as to any Person, any consent,approval, authorization, waiver, grant, concession, license, exemption or orderof, registration, certificate, declaration or filing with, or report or noticeto, such Person.

"**Breaching Party**" shall mean Toshiba in case of aviolation or breach of an applicable agreement by Toshiba or any of itsSubsidiaries, and M-Systems in case of a violation or breach of an applicableagreement by M-Systems or any of its Subsidiaries.  For the avoidanceof doubt, this definition shall have no effect in determining whether anyviolation or breach by a Breaching Party constitutes grounds for termination ofthe applicable agreement.  Such determination shall be madeexclusively in accordance with the applicable provisions of such agreement.

"**Business Day**" shall mean any day except (a) aSaturday or Sunday or (b) any other day on which commercial banks in Tokyo, Japanare authorized by law to close.

## "**Control**" asto an entity shall mean (a) ownership, directly or indirectly, of 50% or moreof the outstanding shares or other ownership interests of such entity, or (b)the right to appoint the majority of the members of the Board of Directors orsimilar body of such entity.

## "**Cut-Off Date**"shall mean January 1, 2011.

 

"**DiskOnKey Products**" shall mean any current orfuture removable data storage products comprised of (1) a non-detachable USBconnector and (2) embedded flash memory for data storage, contained within asingle shell package. For the avoidance of any doubts, the above includesDiskOnKey Products of USB versions 1.1, 2.0, OTG and any other extensions andderivatives thereof.

## "**Effective Date**"shall mean the date of this Agreement.

[***].

"**Governmental Authority**" means any governmentalbody, agency or official of any country or political subdivision of anycountry, including, but not limited to, federal, state, county and localgovernments and administrative agencies; any court, administrative hearingbody, arbitrator, commission or other similar dispute resolving panel or body;and any other entity exercising executive, legislative, judicial, regulatory oradministrative functions of a government.

**_14_** 

 

## "**LicensedPatents**" shall mean the M-Systems Licensed Patents and/or the ToshibaLicensed Patents, as the case may be. 

## "**LicensedProduct**" as to a Party shall mean the M-Systems Licensed Products or theToshiba Licensed Products, as the case may be.

## "**Licensee Party**"shall mean a Party (including its sublicensed Subsidiaries) in its capacity aslicensee or beneficiary of any licenses or immunities under this Agreement.

## "**Licensor Party**"shall mean a Party (including its Subsidiaries) in its capacity as licensor orgrantor of any licenses or immunities under this Agreement.

## [***].

## "**M-SystemsLicensed Patents**" shall mean all Patents entitled to effective filing datesprior to the Cut-Off Date, (a) which are, or at any time during the term ofthis Agreement may be, owned or controlled by M-Systems or its Subsidiaries, or(b) as to which M-Systems or its Subsidiaries has, or may at any time duringthe term of this Agreement acquire, the right to grant licenses or immunities fromsuit (or to bring or refrain from bringing claims or actions for infringement)as set forth herein without paying any compensation to a third party.

## "**M-SystemsLicensed Products**" shall mean all products and systems manufactured andsold by M-Systems and/or its Subsidiaries at any time, whether as of the dateof this Agreement or as of any future date during the term of this Agreement,****other than Semiconductor Devices.  

## "**New MPA**"shall mean the New Master Purchase Agreement entered into between the Partiesas of the Effective Date. 

## "**Patents**"shall mean patents (including utility patents, design patents and utilitymodels) of all countries of the world issued or issuing on patent applications(including provisional applications), together with such patent applicationsand any reissues, continuations, continuations in part, divisionals andreexaminations and foreign counterparts of such patents or patent applications.

## "**Person**"means a natural individual, Governmental Authority, partnership, firm,corporation or other entity.

"**Proceeding**"shall mean any action, litigation, arbitration, suit, proceeding orinvestigation or review of any nature, civil, criminal, regulatory orotherwise, before any Governmental Authority.

## "**SemiconductorDevice**"  shall mean (a) a chipconsisting primarily of a body of semiconductor material having a plurality ofelectrodes associated therewith, or (b) a unitary assembly consisting primarilyof one or more chips as defined in sub-part (a) having fixed permanent physicalrelationship established there between, wherein said Semiconductor Deviceincludes housing means, if provided therewith as part thereof.  

**_15_** 

## *** ***

## "**SpecialConditions**" with respect to a violation or breach (i) of the [***] forpurposes of [***] or (ii) causing an XDOC Product Supply Termination forpurposes of Section 9.3(b) shall mean each of the following conditions:

(a)        [***];

(b)        [***];

(c)        [***].

For the avoidance of doubt,this definition shall have no effect in determining whether any violation orbreach by a Breaching Party constitutes grounds for termination of the [***] orfor XDOC Product Supply Termination or other termination of the New MPA.  Suchdetermination shall be made exclusively in accordance with the applicableprovisions of the [***] or the New MPA, as applicable.

## "**Subsidiary**"shall mean a corporation or other entity of which the applicable Party (a)owns, directly or indirectly, 50% or more of the outstanding shares or otherownership interests, or (b) has the right to appoint the majority of themembers of the Board of Directors or similar body.  For the avoidanceof doubt, [***].

## [***].

## "**ToshibaLicensed Patents**" shall mean all Patents entitled to effective filing datesprior to the Cut-Off Date, (a) which are, or at any time during the term ofthis Agreement may be, owned or controlled by Toshiba and/or any of itsSubsidiaries and which are allocated in the ordinary course of business to TSC,or owned or controlled by the TSC and/or TSC`s Subsidiaries, or (b) as to whichTSC and/or its Subsidiaries have, or may at any time during the term of thisAgreement acquire, the right to grant licenses or immunities from suit (or tobring or refrain from bringing claims or actions for infringement) as set forthherein without paying any compensation to a third party. 

## "**ToshibaLicensed Products**" shall mean all products and systems (including flashmemory cards) manufactured and sold at any time by TSC or its Subsidiaries.  Forthe avoidance of doubt, any product or system that at any time qualifies as aToshiba Licensed Product due to its manufacture and sale by TSC or itsSubsidiaries shall be deemed a Toshiba Licensed Product so long as it ismanufactured and sold by Toshiba or any Subsidiary of Toshiba (including TSC orits Subsidiaries). 

## "**TSC**" shallmean the Semiconductor Company of Toshiba.

## "**USB-RelatedPatent**" shall mean a Licensed Patent that claims any invention orinventions (including any method or process) that is (a) embodied primarily ininterfaces implementing the universal serial bus ("**USB**") protocol or inUSB flash disks, or (b) designed for use, or used, primarily in making, using,selling, developing, designing, assembling, diagnosing, testing and/orrepairing (i) interfaces implementing the USB protocol, or (ii) USB flashdisks.  ****

## ** **

**_16_** 

## ** **

## "**XDOC D&LAgreement**" shall mean the XDOC Development & License Agreement enteredinto by and between the Parties dated as of the Effective Date.

## "**XDOC Product**"shall have the meaning given to such term in the New MPA.

## "**XDOC-RelatedPatent**" shall mean a Licensed Patent that claims any invention orinventions (including any method or process) that is (a) embodied primarily inXDOC Products, or (b) designed for use, or used, primarily in making, using,selling, developing, designing, assembling, diagnosing, testing and/orrepairing XDOC Products.

 

            "**XDOCProduct Supply Termination**" shall mean a termination of the New MPA by thenon-Breaching Party pursuant to Section 16.1.4 of the New MPA as aresult of the Breaching Party's material violation or breach of its materialobligations thereunder relating to the supply or purchase of XDOC Products.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**_17_** 

**Schedule ****9.2(a)**

** **

**Amended Terms ofLicense Rightsto USB-Related Patents pursuant to Section 9.2(a)(i)**

1.         The Breaching Party shall pay to the nonBreaching Party royalty payments on the Breaching Party`s DiskOnKey Revenuesfrom and after the termination date of the [***], calculated as a percentage ofthe Breaching Party`s DiskOnKey Revenues equal to [***].  The nonBreaching Party may approach the Breaching Party if in its opinion applying themechanism described in subsection (ii) would not be equitable under certaincircumstances, and in such case the Parties shall have good faith discussionsabout such circumstances, provided that the mechanism described in subsection(ii) shall be applied unless the non Breaching Party and the Breaching Partyexpressly agree in writing otherwise.****

2.         Any royalties under this Schedule 9.2(a) shallbe calculated per each Royalty Period and shall be payable within [***] daysfollowing the close of each Royalty Period. Each royalty payment will beaccompanied by a statement certified by the Breaching Party describing thenumber of units of DiskOnKey Products sold, the amount of DiskOnKey Revenues,the actual amounts received by such Party and/or its Subsidiaries in connectionwith DiskOnKey Revenue, a calculation of the amount of royalties due to theother Party, and the amount of royalties being paid  

3.         For the purpose hereof the term "DiskOnKeyRevenues" shall mean the sum of all payments invoiced, after the terminationdate, by the Breaching Party and/or its Subsidiaries (other than with respectto invoices issued to (i) the other Party and/or its Subsidiaries, (ii) anyToshiba Internal Company (if Toshiba is the Breaching Party), or (iii) anySubsidiary of the Breaching Party) for any DiskOnKey Products. In the case of asale of DiskOnKey Products by the Breaching Party to a Subsidiary which is thenincorporated into another product with substantial additional value prior tobeing sold to a customer, the calculation of DiskOnKey Revenue for such DiskOnKeyProducts will be based on a price per such DiskOnKey Product equal to thegreater of: (i) the price invoiced by the Breaching Party to the Subsidiary, or(ii) the average selling price paid to the Breaching Party for such DiskOnKeyProduct during the applicable Royalty Period by customers who are not Subsidiariesof the Breaching Party, provided however that if the Breaching Party and/or itsSubsidiaries have not sold any such applicable DiskOnKey Product to any thirdparties during the applicable Royalty Period, then the agreed invoiced amountper such DiskOnKey Product under this Subsection (ii) shall be the averageselling price paid to the non Breaching Party for such DiskOnKey Product duringthe applicable Royalty Period by customers who are not Subsidiaries of the nonBreaching Party.

 

 

 

 

 

**_18_** 

 

4.         In the event that any DiskOnKey Revenueinvoiced by a Party and/or its Subsidiaries is not received by such companieswithin [***] days from the payment date set forth in such invoice (such unpaidamount to be referred to as the "Unpaid Amount"), then the DiskOnKey Revenuefor the next Royalty Period after such date shall be decreased by the UnpaidAmount, provided that if the Unpaid Amount is received by a Party and/or itsSubsidiaries at any time thereafter, such Unpaid Amount shall be added to the DiskOnKeyRevenue for the Royalty Period during which such Unpaid Amount is received. DiskOnKeyRevenue invoiced in currencies other than U.S. dollars will be converted basedon the exchange rate at the close of the last business day of the applicableRoyalty Period in the foreign currency exchange market of Tokyo. Each royaltystatement will include a listing of each exchange rate used in calculating theroyalty payment for the Royalty Period covered by such statement.Notwithstanding the above, the Breaching Party undertakes that any sale of DiskOnKeyProducts to a Subsidiary shall be evidenced by an applicable invoice. 

 

 

** **

** **

** **

** **

** **

** **

** **

** **

** **

** **

** **

** **

** **

** **

 

**_19_** 

**Schedule ****9.2(c)**

** **

**Amended Terms ofLicense Rightsto USB-Related Patents pursuant to Section 9.2(c)(i)**

1.         The Parties shall have good faith negotiationsand agree on appropriate royalty rates (if any) applicable to DiskOnKeyRevenues with respect to each Party`s USB-Related Patents, provided that in nocase shall the royalty rate applicable to either Party exceed [***].  AParty may approach the other Party if in its opinion applying the mechanismdescribed in subsection (ii) would not be equitable under certain circumstances,and in such case the Parties shall have good faith discussions about suchcircumstances, provided that the mechanism described in subsection (ii) shallbe applied unless the Parties expressly agree in writing otherwise.****

2.         Any royalties under this Schedule 9.2(c) shallbe payable in the manner set forth in paragraphs 2 and 3 of Schedule 9.2(a).  

3.         For the purpose hereof the term "DiskOnKeyRevenues" shall have the meaning set forth in Schedule 9.2(a). 

****

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**_20_** 

 

**Schedule ****9.3(a)**

** **

**Amended Terms ofLicense Rightsto XDOC-Related Patents pursuant to Section 9.3(a)(i)**

** **

****1.         TheBreaching Party shall pay to the non Breaching Party royalty payments on theBreaching Party`s [***] (as defined in the XDOC D&L Agreement) from and afterthe date of XDOC Product Supply Termination, calculated as follows:

 

(a)        with respect to royalties on [***], a percentageequal to [***]; and

 

(b)        with respect to royalties on [***], a percentageequal to [***].  

 

2.         The non Breaching Party may approach theBreaching Party if in its opinion applying the mechanism described in paragraph1 above would not be equitable under certain circumstances, and in such casethe Parties shall have good faith discussions about such circumstances,provided that the mechanism described in subsection (ii) shall be appliedunless the non Breaching Party and the Breaching Party expressly agree inwriting otherwise.****

 

3.         Any royalties under this Schedule9.3(a) shall be payable in the manner set forth in the XDOC D&L Agreement;For the avoidance of any doubts, any royalties under this Schedule 9.3(a) shallnot be subject to any caps on payment as set forth in the XDOC D&LAgreement. 

*** ***

*** ***

*** ***

*** ***

*** ***

*** ***

*** ***

*** ***

*** ***

*** ***

*** ***

*** ***

*** ***

*** ***

*** ***

*** ***

*** ***

*** ***

*** ***

*** ***

*** ***

*** ***

*** ***

*** ***

*** ***

**_21_**