Document:

exv10w4

Exhibit 10.4

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into this 16th day of June,
2008, by and between Ulta Salon, Cosmetics & Fragrance, Inc., a Delaware corporation (the
“Company”), and Lyn Kirby (the “Executive”).

WITNESSETH:

     WHEREAS, the Executive and the Company previously have entered into an employment agreement
dated as of June 23, 2006 (the “Prior Agreement”), pursuant to which the Company has employed the
Executive as its President and Chief Executive Officer; and

     WHEREAS, the parties hereto (the “Parties”) desire to continue the Executive’s employment on
the terms and subject to the conditions set forth herein;

     NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and obligations
hereinafter set forth, the parties hereto, intending to be legally bound, hereby agree as follows:

     1. Employment Term. The term of the Executive’s employment under this Agreement shall
commence on March 17, 2008 (the “Commencement Date”) and shall continue unless sooner terminated
under Section 5 through the later of the third anniversary thereof or the date on which the Company
announces its fiscal year 2010-2011 earnings (the “Term”). Upon the expiration of the Term, the
Executive’s employment shall automatically terminate without further obligation of the Parties,
other than Executive’s continued compliance with the Policy (as defined in Section 10).

     2. Duties and Extent of Services.

     (a) During the Term, the Executive shall serve as the President and Chief Executive
Officer of the Company. In addition, at all times during the Term, the Company will
nominate Executive to serve as a member the Board of Directors of the Company (the “Board”).
The Executive shall have such duties and responsibilities as
may be consistent with the position of President and Chief Executive Officer as
reasonably determined, from time to time, by the Board. Executive shall report directly

 

 

to
the Board and shall be subject to the direction and control of the Board, its committees and
its non-executive chairman or any non-executive lead director.

     (b) Notwithstanding Section 2(a), the Executive acknowledges and agrees upon request of
the Board that she will participate in and assist and cooperate with the Board to establish
and implement a successorship strategy in which she will transition the President and Chief
Executive Officer duties to a successor chosen by the Board.

     (c) The Executive shall be a full-time employee of the Company and shall devote her
full business time and efforts to the duties required of her in the positions described in
this Section 2, and in such other positions or offices of the Company or its subsidiaries or
affiliates as may be required of her hereunder consistent with such positions.
Notwithstanding the foregoing provisions of this Section 2, the Executive may from time to
time engage in such other pursuits, including, without limitation personal legal and
personal financial affairs, as shall not materially interfere with the proper performance of
her duties and obligations hereunder.

     3. Compensation.

     (a) Salary. For her services hereunder, effective as of the Commencement Date,
the Company shall pay the Executive a base salary of Seven Hundred Seventy Thousand Dollars
($770,000) per annum, subject to review annually by the Compensation Committee of the Board
(the “Committee”) and adjustment as the Committee based on such review may determine (such
amount, the “Base Salary”) ; provided, however, Executive’s Base Salary may not be decreased
without Executive’s express written consent unless the decrease is pursuant to a general
compensation reduction applicable to all, or substantially all, officers of the Company.

     (b) Base Salary shall be paid in accordance with the regular payroll policies of the
Company in effect from time to time.

     (c) Incentive Bonus Compensation. The Executive shall be eligible to earn a
bonus with respect to each fiscal year of the Company (each, a “Fiscal Year”) completed
during the Term based on Company achievement of performance targets established by

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the
Committee (“Annual Bonus”). The performance targets for the Annual Bonus shall be
established according to the same terms and conditions applicable to other senior management
of the Company. The Executive’s target Annual Bonus for any Fiscal Year shall not be less
than 100% of Base Salary (“Target Bonus Objective”), and the Executive shall be eligible to
earn a maximum bonus of 200% of Base Salary. The actual bonus will be earned in full by the
Executive as of the last day of the related Fiscal Year, based on achievement of the set
performance targets, and paid to Executive no later than April 15 following the end of the
related Fiscal Year, unless it is administratively not practicable to make payment by April
15 due to unforeseen circumstances, in which case it shall be paid as soon as
administratively practical to make such payment but no later than December 31 of such year
(the “Bonus Payment Date”).

     (d) Stock Option Grants.

     (1) The 2008 Option. On March 24, 2008, pursuant to the terms of the
Company’s 2007 Incentive Award Plan (the “LTIP”) the Company granted the Executive
a stock option with respect to 625,000 shares (the “2008 Option Shares”) of the
common stock of the Company (“Common Stock”), par value $0.01 per share (the “2008
Option”) at an exercise price equal to $14.06. The 2008 Option and the Executive’s
rights thereunder are subject to the terms and conditions of the LTIP and the form
option agreement approved by the Committee for option grants under the LTIP;
provided, that the 2008 Option shall vest in accordance with the following schedule,
subject to Section 5 of this Agreement:

     (A) the 2008 Option shall become vested as to 250,000 of the 2008
Option Shares on the date of the Company’s announcement of its Fiscal Year
2008-2009 earnings;

     (B) the 2008 Option shall become vested as to 250,000 of the 2008
Option Shares on the date of the Company’s announcement of its Fiscal Year
2009-2010 earnings; and

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     (C) the 2008 Option shall become vested as to 125,000 of the 2008
Option Shares on the date of the Company’s announcement of its Fiscal Year
2010-2011 earnings.

     In addition, if Executive’s employment is terminated without Cause under Section
5(c) prior to December 31, 2010 then, subject to Section 5(h) and Executive’s
continued compliance with the Policy (as defined in Section 10 below), the 2008
Option shall remain exercisable through March 24, 2011.

     (2) The 2009 Option. The Company shall grant to the Executive, on the
first date that the Company allows executives of the Company to trade in the Common
Stock pursuant to the Company’s trading policy (the “First Trading Date”), following
the announcement of its Fiscal Year 2008-2009 earnings (the “2009 Grant Date”), a
stock option with respect to 200,000 shares (the “2009 Option Shares”) of Common
Stock (the “2009 Option”) at an exercise price equal to Fair Market Value (as
determined under the LTIP or any successor plan thereto) on the 2009 Grant Date.
The 2009 Option and the Executive’s rights thereunder shall be subject to the terms
of the LTIP (or any successor plan thereto) and the standard form option agreement
approved by the Committee for option grants from time to time thereunder; provided,
however, that the 2009 Option shall vest in accordance with the following schedule,
subject to Section 5 of this Agreement:

     (A) the 2009 Option shall become vested as to 100,000 of the 2009
Option Shares on the date of the Company’s announcement of its Fiscal Year
2009-2010 earnings; and

     (B) the 2009 Option shall become vested as to 100,000 of the 2009
Option Shares on the date of the Company’s announcement of its Fiscal Year
2010-2011 earnings.

     (3) The 2010 Option. The Company shall grant to the Executive, on the
First Trading Date following the announcement of its Fiscal Year 2009-2010

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earnings
(the “2010 Grant Date”), a stock option with respect to 200,000 shares (the “2010
Option Shares,” and together with the 2008 and 2009 Options Shares, the “Option
Shares”) of Common Stock (the “2010 Option”) at an exercise price equal to Fair
Market Value (as determined under the LTIP or any successor plan thereto) on the
2010 Grant Date. The 2010 Option and the Executive’s rights thereunder shall be
subject to the terms of the LTIP (or any successor plan thereto) and the standard
form option agreement approved by the Committee for grants of options thereunder;
provided, however, that the 2010 Option shall become vested on the date of the
Company’s announcement of its Fiscal Year 2010-2011 earnings, subject to Section 5
of this Agreement.

     (4) In the event that Executive’s employment is terminated without Cause under
Section 5(c) prior to the date on which the 2009 and 2010 Options are otherwise
scheduled to be granted under Sections 3(d)(2) and (3) above, then the 2009 and 2010
Options shall, subject to Section 5(h) be granted on the date immediately prior to
the date Executive’s employment is so terminated, and shall be fully vested upon
grant.

     (5) Subject to continued compliance with the Policy, the 2009 and 2010 Options
shall have a term of three years from the 2009 and 2010 Grant Dates (including if
the grant date is under Section 3(d)(4)), respectively, during which Executive may
exercise the 2009 and 2010 Options regardless of Executive’s continued employment;
provided, however, that if Executive’s employment is terminated for Cause under
Section 5(b) the 2009 and 2010 Options shall automatically expire and no longer be
exercisable.

     (6) Notwithstanding anything to the contrary contained in this Section 3(d),
each of the 2008, 2009 and 2010 Options (collectively, the “Contract Options”) shall
provide that they shall be fully-exercisable at all times during their respective
terms; provided, however, after the termination of Executive’s employment for any
reason, the Contract Options may be exercised only with respect to vested Option
Shares (including any Contract Options which

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vest upon termination) and all unvested
Contract Options shall expire. In all events the Contract Options and the Option
Shares shall be subject to the vesting provisions set forth in this Section 3(d),
and to the extent the Contract Option is exercised before it has become vested, the
Option Shares so acquired shall be, until the Executive’s rights with respect to
such Option Shares are vested in accordance with this Section 3(d), Restricted Stock
(as defined in the LTIP) subject to forfeiture and cancellation upon the same terms
and conditions as applicable to the Contract Options prior to their exercise. For
this purpose, a Contract Option shall first be deemed to be exercised with respect
to the vested portion thereof, and thereafter with respect to that portion which is
due to become vested hereunder in the shortest time frame. As a condition to
exercising the Contract Options, the Executive shall be required to (i) execute such
agreements as ordinarily executed by recipients of Restricted Stock under the LTIP,
and (ii) deliver in accordance with any method made available under the Plan by the
Committee, cash, vested Option Shares acquired upon exercise of the Contract Options
or other unrestricted shares of Common Stock held by Executive for at least six
months, with a Fair Market Value (as determined under the LTIP or any successor plan
thereto) equal to the minimum amount required to satisfy all income and employment
tax withholding obligations of the Executive that may be due upon exercise of the
Contract Options, vesting of the Restricted Stock or the filing of an election under
Section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”) with
respect thereto.

     (7) Tolling. In the event that upon the Executive’s termination of
employment, (i) the Option Shares may not be issued by reason of any state or
federal law or under rulings or regulations of the Securities and Exchange
Commission or of any other governmental regulatory body or (ii) Executive shall
be prohibited from selling the Option Shares by reason of her possession of material
nonpublic information regarding the Company, then notwithstanding anything contained
in the Contract Option agreements to the contrary, the Contract Options shall be
exercisable through the earlier of (A) the term set forth in the option agreement
notwithstanding any termination of employment; or (B)

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the date that is 90 days
following the date that the Company determines that the provisions of clause (i) or
(ii) of this Section 3(d)(7) no longer apply. The determination of whether the
extension of the option exercise period under this Section 3(d)(7) applies, and when
it ends under clause (B) hereof shall be made in the discretion of the Company, with
the approval of the Audit Committee of the Board of Directors upon the advice of
outside legal counsel to the Company.

     (8) Grants under LTIP. The Executive acknowledges that the Contract
Options are being granted to her in lieu of her eligibility to participate in grants
under the Company’s Long Term Incentive Plan, any successor thereto, or any other
plan or arrangement that the Company may adopt in the future with respect to equity
compensation for senior executives. In addition, Executive agrees not to request to
the Board or any Committee thereof any further equity compensation grants for
herself. However, the parties acknowledge that nothing herein shall preclude the
Committee from deciding, in its sole discretion, to grant the Executive additional
equity awards at any time after the Commencement Date.

     4. Benefits.

     (a) Standard Benefits. During the Term, the Executive shall be eligible to
participate in such medical, health, pension, welfare, and insurance plans offered by the
Company to other management employees as she elects from time to time (subject to the terms
of such plans). The Executive shall participate in any other benefit plans or arrangements
on a basis that is at least as favorable to the Executive as that which is applicable to any
other senior officer of the Company.

     (b) Expenses. The Company agrees to reimburse the Executive for all reasonable
travel and business expenses incurred by her in the performance of her duties hereunder in
accordance with the Company’s business expense reimbursement policies as in effect from time
to time. All such reimbursements shall be made no later than December 31 of the year
following the year in which the expense was incurred. The amount of reimbursements provided
in
one year shall not affect the amounts provided in

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any subsequent year. Such
reimbursements shall not be subject to liquidation or exchange for another benefit.

     (c) Vacation. The Executive shall be entitled to four weeks of annual vacation
to be accrued and taken in accordance with the Company’s vacation policy for senior
executives.

     (d) Indemnification. The Executive shall be entitled to the same
indemnification under the terms of the Company’s By-Laws and Articles of Incorporation as is
provided, and such liability insurance as the Company may from time to time purchase, for
its Board members and senior officers, including such post-termination indemnification and
liability insurance as applicable to other Board members and senior executives.

     (e) New York State Tax. Each year during the Term, the Company shall reimburse
Executive for the difference, if any, between the income taxes actually paid by Executive as
a result of her performance of services for the Company in New York state, and the rate
Executive would otherwise have paid on such income as a resident of Illinois. The Company
shall also reimburse Executive for any penalties and interest payable by Executive with
respect to income from service for the Company taxable in New York for years prior to 2007.

     5. Termination.

     (a) Death or Disability. The Executive’s employment shall automatically
terminate upon the death of the Executive, or Disability (defined below). In the event
that the Executive’s employment terminates by reason of Disability or death, the
Executive shall be entitled to the following:

     (1) Base Salary accrued through the last day of the Executive’s employment with
the Company (the “Termination Date”), all earned but unpaid Annual Bonus for the
year prior to the year in which the Termination Date occurs, all accrued but unused
vacation, and accrued benefits under the Company’s

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employee benefit plans (the
“Accrued Benefits”), payable within the time required under state wage payment law;

     (2) (i) The Executive’s Base Salary at the rate in effect on the Termination
Date payable in twelve (12) equal monthly installments; and (ii) an amount equal to
the Annual Bonus which Executive would have earned based on the Company’s
performance in the Fiscal Year of such termination, multiplied by a fraction the
numerator of which is the number of days in the Fiscal Year elapsed through the
Termination Date and the denominator is 365 (the “Pro-Rated Bonus”) payable in a
lump sum as provided in Section 5(a)(3); provided, however, that in the event of her
termination for Disability, all amounts payable under Section 5(a)(2) shall be
subject to Sections 5(h), Section 7 and continued compliance with the Policy; and

     (3) Amounts payable under Section 5(a)(2)(i) shall commence on the Company’s
first regularly scheduled payroll date following (A) the Release Effective Date (as
defined in Section 5(h)) if payable upon the Disability, or (B) Executive’s death,
if payable by reason of death. The Pro-Rated Bonus shall be payable on the Bonus
Payment Date for such Fiscal Year or, if later, the Release Effective Date, if
payable due to termination by reason of Disability.

     The Executive’s rights and benefits under any other applicable Company plans or
programs including, but not limited to, the LTIP (the “Company Plans”), shall be as
determined under such plans or programs.

     The term “Disability” shall mean a medical condition entitling the Executive to
long-term disability compensation under the terms of any long-term disability plan
applicable to the Executive and other management employees, and in the absence thereof shall
mean that, due to physical or mental illness, the Executive shall have failed to perform her
duties on a full-time basis hereunder for one hundred eighty (180) consecutive days
(“Disability Period”). Any termination of the Executive’s employment by the Company for
Disability shall be communicated by written notice of termination specifying the reason for
termination (“Disability Termination Notice”) and the

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Termination Date shall be the later of
(i) the date of Disability or (ii) thirty (30) days following the Executive’s receipt of the
Disability Termination Notice. Any dispute as to the Executive’s Disability shall be
resolved by an independent physician selected by the Board and reasonably acceptable to the
Executive or her legal representative.

     (b) Cause. The Company may terminate the Executive’s employment for Cause
(defined below) by written notice to the Executive at any time when Cause exists. In such
case the Company shall pay the Executive the Accrued Benefits within the time period
prescribed by state wage payment law and the Executive’s rights under any of the Company
Plans shall be as determined under the terms thereof. For purposes of this Agreement,
“Cause” shall mean the Executive’s:

     (1) continued willful failure substantially to perform her duties, following
written notice (other than by reason of disability);

     (2) willful engagement in gross misconduct that is materially injurious to the
Company;

     (3) willful fraudulent or dishonest action that is materially detrimental to
the business or reputation of the Company;

     (4) willful and material breach of the Policy or any policy of the Company
relating to discrimination, harassment or trading in the Company’s securities, after
the Executive has been given written notice detailing the specific
event constituting such breach and a period of thirty (30) days following
receipt of such notice to cure such event (if susceptible to cure); or

     (5) conviction of, or plea of guilty or nolo contendere to a felony.

     For purposes of this Section 5(b), an act or failure to act shall be considered
“willful” only if done or omitted to be done without a good faith reasonable belief that
such act or failure to act was in the best interests of the Company.

     The Company shall provide Executive with at least ten (10) days written notice of its
intent to terminate her employment for Cause and during any such notice period may

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suspend
Executive from her duties and position without pay. Any determination of Cause by the
Company will be made by a resolution approved by a majority of the members of the Board
after the Executive has been provided with the opportunity (with counsel of her choice) to
contest the determination at a meeting of the Board. The determination of Cause by the
Company may be made anytime before or after the Executive’s Termination Date; provided that
any retroactive determination that Executive’s termination was for Cause shall be based on
facts and circumstances not reasonably known to the Board on the Termination Date.

     (c) Termination Without Cause. The Company may terminate the Executive’s
employment at any time without “Cause” (as defined below) by written notice to the
Executive. In such case the Executive shall be entitled to:

     (1) the Accrued Benefits, payable within the time period prescribed by state
wage payment law;

     (2) subject to Sections 5(h), Section 7 and continued compliance with the
Policy, an amount equal to: (i) two (2) times the Executive’s Base Salary at the
rate in effect on the Termination Date payable in twelve (12) equal monthly
installments commencing on the first regularly scheduled payroll date following the
Release Effective Date, and (ii) the Pro-Rated Bonus payable in a lump sum on the
later of (A) the Release Effective Date, or (B) the Bonus Payment Date for such
Fiscal Year;

     (3) subject to Sections 5(h) and continued compliance with the Policy; provided
that the Executive elects continuation Coverage under Section 4980B of the Code
(“COBRA”), then for the duration of the COBRA period, but not to exceed eighteen
(18) months after the Termination Date, continued health benefits (including any
medical, vision or dental benefits), under the Company’s health plans and programs
under COBRA, but at the same cost to the Executive as would have applied in the
absence of such termination; and

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     (4) subject to Section 5(h) and continued compliance with the Policy all of the
Contract Options (and any Restricted Stock into which Contract Stock was exercised
under Section 3(c)(4)) shall vest, become fully exercisable and nonforfeitable on
the Release Effective Date.

     The Executive’s rights and benefits under the Company Plans and any other option shall
be as determined under such plans, programs and option agreements.

     (d) Termination by Executive for Good Reason. The Executive may terminate her
employment under this Agreement for Good Reason (defined below) by written notice to the
Company. Any termination for Good Reason pursuant to this Section 5(d) shall be deemed to
be a termination by the Company without Cause and Executive shall be eligible for the
payments and benefits under Section 5(c) of this Agreement, subject to the terms and
conditions thereof. For purposes of this Agreement, the term “Good Reason” means:

     (1) A material reduction by the Company, without the Executive’s written
consent, in the Executive’s material duties and responsibilities, including but not
limited to loss of board position, or the assignment of duties materially
inconsistent with the Executive’s position with the Company as previously assigned
by the Board; provided, however, that any reduction in Executive’s duties and
responsibilities and the assignment to Executive of new duties in connection with
the implementation of the successorship plan described in Section 2(b) shall not
constituted Good Reason under this Section 5(d)(1);

     (2) An adverse or material change in reporting responsibilities, including any
requirement that the Executive report to anyone other than the Board;

     (3) The Company’s appointment of a successor chief executive officer or
executive chairman prior to January 1, 2011;

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     (4) Except as permitted by Section 3(a), any material reduction by the Company,
without the Executive’s written consent, of the Executive’s Base Salary or Target
Bonus Objective; or

     (5) Any material breach by the Company of its obligations under this Agreement;

     provided, that Executive must give written notice to the Company within thirty (30)
days of any event giving rise to Good Reason and the Company must fail to cure within
thirty (30) days of such notice in order for such event to qualify as a Good Reason
termination.

     (e) Termination by Executive other than for Good Reason. The Executive may
terminate her employment other than for “Good Reason” at any time upon thirty (30) days
prior written notice to the Company. In such case the Company shall pay to the Executive
any Accrued Benefits within the time period prescribed by state wage payment law. The
Executive’s rights and benefits under any of the Company Plans shall be as determined under
the terms thereof.

     (f) Change in Control. In the event of a Change in Control (as defined in the
LTIP) and the Executive’s employment is terminated by the Company other than for Cause, or
by the Executive for Good Reason within the twelve month period following the Change in
Control, then, subject to Section 5(h), in addition to the Executive’s rights under Section
5(c) or 5(d) above, all of the Executive’s Options (whether or not granted prior to or
following the Commencement Date), or any Restricted Stock into which the
Contract Stock was exercised under Section 3(d)(4), shall immediately vest, become
fully exercisable and nonforfeitable on the Release Effective Date.

     (g) Effect of Termination. Upon the termination of the Executive’s employment
with the Company for any reason and upon such termination, the Executive shall be deemed to
have resigned immediately from all offices held by her in the Company or any of its
subsidiaries.

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     (h) Release and Timing of Payment. Executive’s rights to receive the payments
and benefits under Section 5(a)(2), 5(c)(2), (3) and (4), 5(f) and the grant of the 2009 and
2010 Options under Section 3(c)(4), (the “Severance Benefits”) shall be subject to
Executive’s execution, delivery and not revoking a release of claims and covenant not to
sue, in the form attached hereto as Exhibit A (the “Release”), following the
Termination Date. The Release shall be effective on the 8th day following
Executive’s execution and delivery of the Release, if Executive does not revoke the Release
during such period (the “Release Effective Date”). However, in no event shall the Release
Effective Date be later than seventy-five days following the Termination Date.
Notwithstanding any provision herein to the contrary, the Severance Benefits shall be paid
or provided only upon Employee’s “separation from service” as defined in Treasury Regulation
Section 1.409A-1(h).

     6. Notices. Any notice or other communication required or permitted to be given under
this Agreement shall be in writing and shall be deemed given (i) when delivered or refused if sent
by hand during regular business hours, (ii) three (3) business days after being sent by United
States Postal Service, registered or certified mail, postage prepaid, return receipt requested, or
(iii) when recorded as delivered by reputable overnight express mail service that provides tracing
and proof of receipt or refusal at the address or addresses set forth below or such other addresses
as the parties may designate in a notice given in accordance with this Section.

     If to the Company:

c/o Global Retail Partners

Attn: Steven Lebow

Suite 1630

2121 Avenue of the Stars

Los Angeles, California 90067

     with a copy to:

Latham & Watkins

Sears Tower, Suite 5800

233 South Wacker Drive

Chicago, Illinois 60606

Fax: (312) 993-9767

Attention: Robin Struve

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     If to the Executive:

Lyn Kirby

16 Ambriance Drive

Burr Ridge, Illinois 60521

     with a copy to:

Bachelder & Dowling, P.A.

120 Exchange Street

P.O. Box 7003

Portland, ME 04112-7003

Attention: Stephan G. Bachelder

     7. Special Rule for U.S. Income Tax Compliance. Notwithstanding anything in this
Agreement to the contrary, the Parties intend that this Agreement comply with Section 409A of the
Code and all guidance or regulations thereunder (“Section 409A”), and this Agreement and the
payment of any benefits hereunder shall be operated and administered accordingly. Notwithstanding
anything contained in this Agreement to the contrary, to the maximum extent permitted by applicable
law, amounts payable to the Executive pursuant to Section 5(a)(2) or 5(c)(2) shall be made in
reliance upon Treas. Reg. Section 1.409A-1(b)(9) (Separation Pay Plans) or Treas. Reg. Section
1.409A-1(b)(4) (Short-Term Deferrals). However, to the extent any such payments are treated as
non-qualified deferred compensation subject to Section 409A of the Code, then if Executive is
deemed at the time of her separation from service to be a “specified employee” for purposes of
Section 409A(a)(2)(B)(i) of the Code, then to the extent delayed commencement of any portion of the
benefits to which Executive is entitled under this Agreement is required in order to avoid a
prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of Executive’s
termination benefits shall not be provided to Executive prior to the earlier of (A) the expiration
of the six-month period measured from the date of the
Executive’s “separation from service” or (B) the date of Executive’s death. Upon the earlier
of such dates, all payments deferred pursuant to this Section 7 shall be paid to the Executive in a
lump sum without interest thereon. The determination of whether the Executive is a “specified
employee” for purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of her separation
from service shall made by the Company in accordance with the terms of Section 409A of the Code and
applicable guidance thereunder (including without limitation Treas. Reg. Section 1.409A-1(i) and
any successor provision thereto). For purposes of this Agreement each

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installment payable under
Sections 5(a)(2) and 5(c)(2) shall be shall be considered a separate payment.

     8. Entire Agreement. This Agreement constitutes the entire agreement between the
parties hereto with respect to the transactions contemplated herein, and it supersedes all prior
discussions, understandings or agreements between the parties, including the Prior Agreement. This
Agreement supersedes all prior negotiations and discussions whether oral or written between the
parties with respect to its subject matter.

     Except as provided herein, the payment obligations of the Company hereunder shall not be
subject to offset. The Executive shall have no obligation to take any action to mitigate or offset
any amounts payable by the Company pursuant to this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment provided for in this Agreement be reduced by any
compensation earned by the Executive as the result of employment by another employer after the
Termination Date or otherwise.

     9. Waiver. No delay in exercising any right or remedy shall constitute a waiver
thereof, and no waiver by the Company or the Executive of the breach of any covenant of this
Agreement shall (a) be effective unless in writing and signed by the waiving party, or (b) be
construed as a waiver of any preceding or succeeding breach of the same or any other covenant or
condition of this Agreement.

     10. Policy Regarding Noncompetition, Nonsolicitation and Confidential Information. In
connection with this Agreement, and in consideration of the severance benefits and option exercise
periods under the Contract Options, Executive agrees to execute and comply with the terms of the
Policy Regarding Noncompetition, Nonsolicitation and Confidential
Information — As Amended and Restated in the form attached as Exhibit B. Executive’s
rights to the Severance Benefits are expressly conditioned upon continued compliance with the terms
of the Policy, and in addition to the rights given to the Company therein, to the extent that
Executive breaches the Policy, then (1) the Company’s obligation to pay or continue providing the
Severance Benefits shall cease, (2) all unexercised Options shall immediately be forfeited and
cancelled, and (3) Executive shall repay to the Company the amount of the after-tax income received
by the Executive upon the exercise of the Contract Options, and/or the sale of Option

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Shares
received upon the exercise of any Contract Options, which vested under Section 5(c)(4) on the
Termination Date.

     11. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois applicable to contracts made and to be performed therein,
without regard to conflict of law principles thereof. Subject to Section 12, any action to enforce
any of the provisions of this Agreement shall be brought in a court of the State of Illinois or in
a Federal court located within the State of Illinois. The parties consent to the jurisdiction of
such courts and to the service of process in any manner provided by Illinois law.

     12. Disputes. Any dispute or controversy arising under, out of, in connection with or
in relation to this Agreement (except with respect to the Policy referred to in Section 10, which
shall be governed by the dispute resolution provisions specified therein), including any claims for
discrimination or other similar violation of federal law, shall be finally determined and settled
by arbitration in Chicago, Illinois, in accordance with the rules and procedures regarding
commercial contract disputes as established by the American Arbitration Association, and judgment
upon the award may be entered in any court having jurisdiction thereof as provided in Section 11.

     If any arbitration or other proceeding is brought for the enforcement of this Agreement, or
because of an alleged dispute, breach, default or misrepresentation in connection with any of the
provisions of this Agreement, the successful or prevailing party shall be entitled to recover
reasonable attorneys’ fees and other costs incurred in that action or proceeding, in addition to
any other relief that may be granted.

     13. Assignability. The obligations of the Executive hereunder may not be delegated
and, except with respect to the designation of beneficiaries in connection with any of the benefits
payable to the Executive hereunder, the Executive may not, without the Company’s written consent,
assign, transfer, convey, pledge, encumber, hypothecate or otherwise dispose of this Agreement or
any interest herein. Any such attempted delegation or disposition shall be null and void and
without effect. The Company and the Executive agree that this Agreement and all of the Company’s
rights and obligations hereunder may be assigned or transferred by the Company

17

 

to and shall be
assumed by and be binding upon any successor to the Company. The term “successor” means, with
respect to the Company or any of its subsidiaries, any corporation or other business entity which,
by merger, consolidation, purchase of the assets or otherwise acquires all or a material part of
the assets of the Company.

     14. Enforceability. It is the intention of the Parties that the provisions of this
Agreement shall be enforced to the fullest extent permissible under the laws and public policies of
each state and jurisdiction in which such enforcement is sought, but that the unenforceability (or
the modification to conform with such laws or public policies) of any provisions hereof, shall not
render unenforceable or impair the remainder of this Agreement. Accordingly, if any provision of
this Agreement shall be determined to be invalid or unenforceable, either in whole or in part, this
Agreement shall be deemed amended to delete or modify, as necessary, the offending provisions and
to alter the balance of this Agreement in order to render the same valid and enforceable to the
fullest extent permissible.

     15. Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns.

     16. Amendment. This Agreement may be amended only by a written instrument executed by
the Company and the Executive.

     17. Expenses. The Company will reimburse the Executive for reasonable legal fees and
expenses incurred by the Executive in the negotiation and documentation of this Agreement up to a
maximum of $40,000. All such fees and expenses will be paid by the Company within thirty (30) days
after the Company’s receipt of the invoices therefor.

     18. Headings. All headings herein are inserted for convenience and ease of reference
purposes only and are not to be considered in the construction or interpretation of this Agreement.

     19. Counterparts. This Agreement may be executed in two (2) or more counterparts,
each of which shall for all purposes constitute one (1) agreement which is binding on all of the
parties hereto.

18

 

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first
written above.

	 	 	 	 	 
	 	ULTA SALON, COSMETICS & FRAGRANCE, INC.

 	 
	 	By:  	/s/ Steven Lebow
 	 
	 	 	Name:  	Steven Lebow 	 
	 	 	Title:  	Director 	 
	 
	 	EXECUTIVE

 	 
	 	/s/ Lyn Kirby
 	 
	 	Lyn Kirby 	 
	 	 	 
	 

19exv10w1

EXHIBIT 10.1

FOIA Confidential Treatment Requested

Execution Version

3D COLLABORATION AGREEMENT

This 3D COLLABORATION AGREEMENT, dated as of June ___, 2008, (“Effective Date”) is made and
entered into by and between Toshiba Corporation, a Japanese corporation with a principal place of
business at 1-1, Shibaura 1-chome, Minato-ku, Tokyo 105-8001, Japan (“Toshiba”) and SanDisk
Corporation, a Delaware corporation, with a principal place of business at 601 McCarthy Boulevard,
Milpitas, CA 95035, U. S. A. (“SanDisk”). Toshiba and SanDisk are each referred to as a
“Party” and collectively as the “Parties”.

WHEREAS, Toshiba, SanDisk and SanDisk (Ireland) Limited have entered into the Flash Alliance Master
Agreement, dated as of July 7, 2006 (“FA Master Agreement,” and together with the
agreements contemplated thereby, the “FA Agreements”);

WHEREAS, pursuant to the FA Agreements, the Parties have an existing collaboration with respect to,
among other things, the manufacturing of NAND Flash Memory Products;

WHEREAS, the Parties have entered into a memorandum of understanding dated as of February 19, 2008,
to expand such collaboration through the construction by Toshiba of a new semiconductor fabrication
facility in Japan (“Fab 5 Facility”) at which [***]* (“Fab 5 MOU”);

WHEREAS, the Parties intend to enter into various agreements implementing the terms of the Fab 5
MOU (“Fab 5 Agreements”), including a Fab 5 Master Agreement (“Fab 5 Master
Agreement”);

[***]*

WHEREAS, the Parties desire to further expand their collaboration through a project for the joint
development of and other technical collaboration on 3D Memory (as defined below) technology
(“3D Project”);

NOW, THEREFORE, the Parties agree as follows:

Article 1. DEFINITIONS

               Unless otherwise indicated, capitalized terms used in this Agreement without definition have
the meanings given to them in the [***]* or in the [***]*.

          1.1 “3D CMOS” shall mean [***]*.

          1.2 “3D Development” shall mean all research and development related to 3D Memory.

          1.3 “3D Memory” shall mean a memory technology [***]*.

 

			
	*	 	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.

 

 

          1.4 “3D Memory Products” shall mean: [***]*. All 3D Memory Products are
governed by this Agreement, unless otherwise mutually agreed in writing by the Parties.

          1.5 “3D R/W Project” shall mean the joint development of 3D Memory technology related
to R/W (as defined below).

          1.6 “Agreement” shall mean this 3D Collaboration Agreement together with any Exhibits,
Schedules, Appendices and Attachments hereto.

          1.7 “Authorized Recipients” is defined in Section 10.3.

          1.8 “Basic Process Technology” shall mean all unit process steps that are not 3D
Memory specific including, but not limited to, resist ashing, wet clean, metal depositions, photo
lithography steps, oxide depositions or any other unit process step that can be adapted for use by
or with 3D Memory Products.

          1.9 “CMOS Logic” shall mean [***]*, as discussed and mutually agreed, in writing, by
the Parties as part of the 3D Project.

          1.10 “Confidential Information” is defined in Section 10.1.

          1.11 “Disclosing Party” is defined in Section 10.2.

          1.12 “Excluded Memory Product” is defined in Section 2.6.

          1.13
“First Anniversary Date” is defined in
Exhibit A.

          1.14 “ICC” is defined in Section 12.6.

          1.15 “Jointly Developed Inventions” shall mean inventions jointly made by the
employees of Toshiba and SanDisk or their respective Subsidiaries during the performance of joint
research and development relating to the 3D Project.

          1.16 “Jointly Developed Patents” shall mean Patents (excluding design patents) that
arise out of the Jointly Developed Inventions.

          1.17 “Memory Integrated Circuit” shall mean [***]*.

          1.18 “Net Sales Price” shall mean

               (a) For sales or transfers of 3D Memory Products to any person or entity that is [***]*; or

               (b) For sales or transfers of 3D Memory Products to any person or entity that is [***]*.

          1.19 “[***]* Intellectual Property Rights” shall mean [***]*.

          1.20 “OTP” shall mean [***]*.

 

			
	*	 	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.

2

 

          1.21 “Patent Family” means all worldwide patents and patent applications, including
all continuations, continuations-in-part, divisions, reexaminations, and reissues thereof, that
claim priority to one or more common patent applications.

          1.22 “Patents” shall mean all U.S. and foreign rights in and to all patents, patent
applications and utility models, including all divisions, substitutions, continuations,
continuation-in-part applications, and reissues, re-examinations and extensions thereof.

          1.23 “R/W” shall mean a 3D Memory Product on which data can be written, erased and
rewritten.

          1.24 “R/W Termination Option” is defined in Section 6.1(c).

          1.25 “Receiving Party” is defined in Section 10.2.

          1.26 “Residuals” shall mean that Confidential Information which may be unintentionally
retained in the memories of personnel of either Party who have been assigned by such Party to the
3D Project and who have had rightful access to the other Party’s confidential information including
ideas, concepts, know-how or techniques contained therein.

          1.27 “SanDisk Background IP” is defined in Section 3.2.

          1.28 “SanDisk Contributions” is defined in Section 2.1.

          1.29 “Solely Developed Inventions” shall mean inventions made solely by the employees
of either Party or such Party’s Subsidiaries during the performance of joint research and
development among the Parties relating to the 3D Project.

          1.30 “Subsidiaries” shall mean any corporation, company or other entity (other than
any joint venture formed by the Parties so long as such entity remains a joint venture):

               (a) more than fifty percent (50%) of whose outstanding shares or stocks entitled to vote for
the election of directors (other than any shares or stocks whose voting rights are subject to
restriction) is now or hereafter owned or controlled by SanDisk or Toshiba, as applicable, directly
or indirectly, but such corporation, company or other entity shall be deemed to be a Subsidiary
only so long as such ownership or control exists; or

               (b) which does not have outstanding shares or securities, as may be the case in a partnership,
joint venture or unincorporated association, but more than fifty percent (50%) of whose ownership
interest representing the right to make the decisions for such corporation, company or other entity
is now or hereafter, owned or controlled, directly or indirectly, by SanDisk or Toshiba, as
applicable , but such corporation, company or other entity shall be deemed to be a Subsidiary only
so long as such ownership or control exists. SanDisk 3D LLC, a Delaware limited liability company,
with a principal place of business at 601 McCarthy Boulevard, Milpitas, CA 95035, U.S.A., which
owns or controls all intellectual property rights that had been owned or controlled by Matrix
Semiconductor, Inc., as of the date of its acquisition by SanDisk, shall be considered SanDisk’s
Subsidiary.

          1.31 “Toshiba Background IP” is defined in Section 3.1.

3

 

          1.32 “Toshiba Contributions” is defined in Section 2.2.

Article 2. CONTRIBUTIONS, DEVELOPMENT & PRODUCTION

          2.1 SanDisk Contributions. SanDisk will disclose all of its existing and future
(subject to Section 2.3 below) knowledge, know how and research (to the extent permitted under
applicable contracts) related to 3D Memory, 3D Memory Products and 3D CMOS for use by the Parties
in the Parties’ applicable joint venture(s) or other facilities as permitted according to
[***]* and the 3D Project (collectively, “SanDisk Contributions”) part of which
details are described in Exhibit B attached hereto.

          2.2 Toshiba Contributions. Toshiba will disclose all of its existing and future
(subject to Section 2.3 below) knowledge, know how and research (to the extent permitted under
applicable contracts) related to 3D Memory, 3D Memory Products and 3D CMOS, including, but not
limited to, Basic Process Technology, for use by the Parties in the Parties’ applicable joint
venture(s) or other facilities as permitted according to [***]* and in the 3D Project
(collectively, “Toshiba Contributions”). If mutually agreed by the Parties, Toshiba will
further contribute CMOS Logic to [***]* in order for the Parties to make such CMOS Logic available
to [***]*, provided, however, that compensation to Toshiba for such contribution shall be subject
to mutual agreement between the Parties to be made at the time of its contribution, [***]*. At the
time of such disclosure of the CMOS Logic by Toshiba, any such contribution shall be deemed to be a
Toshiba Contribution.

          2.3 Separately Developed Contributions. Each Party will disclose all knowledge, know
how and research (to the extent permitted under applicable contracts) related to 3D Memory Products
for use by the Parties [***]* and in the 3D Project even if such knowledge, know how and research
was developed without the other Party, provided, however, [***]*.

          2.4 Development of 3D Memory and 3D Memory Products.

               (a) The Parties agree that equal partnership is important and the Parties will form teams and
begin work on the development of 3D Memory and 3D Memory Products (except for OTP) immediately in
accordance with the guidelines set forth in the [***]*. [***]* the roadmap of the 3D Project and
will be responsible for the Parties’ implementation and execution of such roadmap.

               (b) The [***]* to start immediately in accordance with the guidelines set forth [***]*.

               (c) The Parties will establish an optimized 3D CMOS technology in the [***]*, as mutually
agreed by the Parties.

               (d) Unless otherwise mutually agreed by the Parties, all development work performed to
exclusively benefit [***]* product with a [***]* will each be done by SanDisk [***]*. SanDisk will
use reasonable efforts not to interfere with the standard operation of the other production lines
at the [***]* and Toshiba will reasonably assist with the above, with process and module
integration, and with supply of Basic Process

 

			
	*	 	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.

4

 

Technology that will be applied to 3D Memory and 3D Memory Products and will use commercially
reasonable efforts to support [***]*.

          2.5 Non-3D Memory.

               (a) With respect to 3D memory technology not within the definition of 3D Memory, each Party
shall offer such technology to the Parties’ joint ventures, provided that any compensation to the
other Party shall be subject to mutual agreement between the Parties.

               (b) When one Party offers any specific 3D Memory for joint development and the other Party
declines such offer after good faith discussion, then such 3D Memory shall no longer be deemed 3D
Memory, and products based thereon shall not be deemed a 3D Memory Product.

          2.6 Production of 3D Memory Products. The Parties agree that all [***]* or other
SanDisk facilities, [***]*, except as otherwise mutually agreed by the Parties); provided, however,
that [***]*. The first priority for production of these products (except for OTP) shall be on an
equal basis. If one Party is not willing to support production of such products on an equal basis
within the joint ventures, then the other Party [***]* unless otherwise provided for in the [***]*;
provided, that if the Parties after good faith discussion decide to not jointly manufacture any
specific 3D Memory Products (an “Excluded Memory Product”), the [***]* will set forth
further detailed provisions which will include any applicable terms and conditions regarding the
production of such Excluded Memory Product, including, but not limited to, provisions relating
[***]*, each as applicable.

Article 3. OWNERSHIP

          3.1 Toshiba Background IP. During and after the term of this Agreement, Toshiba will
exclusively retain all right, title and interest in and to all intellectual property rights
created, conceived, owned or developed by or for Toshiba and its Subsidiaries: (a) on or before the
Effective Date, (b) which result from activities that are independent from but concurrent with the
3D Project during the term of the Agreement, or (c) which result from Toshiba’s Solely Developed
Inventions (collectively, “Toshiba Background IP”).

          3.2 SanDisk Background IP. During and after the term of this Agreement, SanDisk will
exclusively retain all right, title and interest in and to all intellectual property rights
created, conceived, owned or developed by or for SanDisk and its Subsidiaries: (a) on or before the
Effective Date, (b) which result from activities that are independent from but concurrent with the
3D Project during the term of the Agreement, or (c) which result from SanDisk’s Solely Developed
Inventions (collectively, “SanDisk Background IP”).

          3.3 Jointly Developed IP.

               (a) Any right, title and interest in, to and under Jointly Developed Inventions and Jointly
Developed Patents shall be jointly owned by Toshiba and SanDisk. Both Parties shall promptly agree
on which of them shall file and prosecute the first patent application and in which countries
corresponding applications shall be filed and by whom. All expenses incurred in obtaining and
maintaining such patents shall be equally shared by

 

			
	*	 	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.

5

 

the Parties; provided that if one Party elects not to seek or maintain such patents in any
particular country or not to share equally in the expense thereof, the other Party shall have the
right to seek or maintain such patents in said country at its own expense and shall have full
control over the prosecution and maintenance thereof even though title to any patent issuing
thereon shall be joint. The Party electing not to seek or maintain such patents shall give the
other Party any necessary assistance required for the preparation and prosecution of such patents
filed or maintained by the other Party.

               (b) Each Party shall be free to use such Jointly Developed Inventions and Jointly Developed
Patents for any purpose and, each Party shall have the right to grant non-exclusive licenses to any
[***]*; and, provided further, that [***]*.

Article 4. LICENSES

          4.1 Toshiba 3D License. Toshiba hereby grants to SanDisk and its Subsidiaries a
non-exclusive, non-sublicensable, non-transferable, world wide, [***]* license, under the [***]*
Intellectual Property Rights of Toshiba and its Subsidiaries, to use Toshiba’s Contributions to
develop, have developed, make, have made, use, sell, offer for sale, import and otherwise dispose
of any of SanDisk’s 3D Memory Products, any other SanDisk semiconductor products and SanDisk
integrated circuit memory system containing 3D Memory Products.

          4.2 SanDisk 3D License. Subject to Toshiba’s payment as set forth in Article 6
herein, SanDisk hereby grants to Toshiba and its Subsidiaries a non-exclusive, non-sublicensable,
non-transferable, world wide, [***]* (except as otherwise set forth herein) license, under the
[***]* Intellectual Property Rights of SanDisk and its Subsidiaries, to use SanDisk’s Contributions
to develop, have developed, make, have made, use, sell, offer for sale, import and otherwise
dispose of any of Toshiba’s 3D Memory Products, any other Toshiba semiconductor products and
Toshiba integrated circuit memory system containing 3D Memory Products.

          4.3 Notwithstanding anything to the contrary in Section 4.1 and 4.2, neither Party shall
disclose the other Party’s contributions described in Sections 2.1 and 2.2, respectively, to any
third party without the consent of the other Party, which consent shall not be unreasonably
withheld, conditioned or delayed, and neither Party shall disclose [***]* Intellectual Property
Rights to any third party without the consent of the other Party, which consent shall not be
unreasonably withheld, conditioned or delayed, provided, however, that such latter prohibition
shall not apply to SanDisk if Toshiba exercises its R/W Termination Option hereunder.

          4.4 Subject to each Party’s obligations under the provisions of Articles 3, 8, 9 and 12, each
Party shall be free to use, improve or modify without additional compensation to the other Party,
the Residuals, including the use, improvement or modification of such Residuals in the development
and manufacture of such Party’s products; provided that this Section, by itself, shall not be
deemed to grant to such Party any rights or licenses under any Patents of the other Party nor shall
this Section operate to waive such Party’s confidentiality obligations under Article 10. In no
event shall such either Party or its Personnel publish or disseminate said Residuals to any third
party.

 

			
	*	 	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.

6

 

          4.5 License Restrictions.

               (a) Notwithstanding anything to the contrary herein, no license [***]* granted hereunder
includes the right for [***]* to have developed, make, have made, use, sell, offer for sale, import
or otherwise exploit any:

                    (i) [***]*

                    (ii) [***]*.

Article 5. IP LITIGATION

          5.1 General. If one Party is sued, but not the other, in litigation relating to a
claim by a third party that 3D Memory infringes or 3D Memory Products infringe any patent owned by
such third party, the Party that is the defendant in the litigation shall take the lead on the
defense and the Party not sued shall reasonably assist such Party named as the defendant.

          5.2 Jointly Developed IP; Defense. Toshiba and SanDisk will jointly defend against
claims for infringement of third party patents to the extent arising from Jointly Developed
Inventions provided that each Party shall have a responsibility to resolve the issue at its own
discretion, subject to the consent of the other, which consent shall not be unreasonably withheld,
conditioned or delayed. The Parties shall discuss in good faith the respective role of each Party
for such joint defense (including who would take the lead on defense) on a case-by-case basis
considering various factors such as jurisdiction where litigation has been filed.

          5.3 Jointly Developed IP; Enforcement. [***]*.  In the event that either party
desires to litigate such infringement and the other party refuses or fails to do so, [***]*, the
party desiring litigation may in his or its sole discretion, and at his or its sole cost and
expense (including reimbursement of unavoidable expenses of the other party), bring and proceed
[***]*. For the avoidance of doubt, a license under a Jointly Developed Patent as result of such
suit shall be subject to the limitation set forth in Article 3.3 (b).

Article 6. PAYMENT

          6.1 License Fee. In consideration of SanDisk Contributions and the license granted to
Toshiba hereunder, Toshiba shall pay SanDisk [***]* on the following schedule:

               (a) The first [***]* shall be paid in [***]* installments in accordance with the schedule set
forth in Exhibit A attached hereto; and

               (b) The remaining [***]* shall be paid in the amount of [***]*, each in [***]* installments in
accordance with the schedule set forth in Exhibit A attached hereto.

               (c) Notwithstanding the foregoing, on the [***]* year anniversary of the Effective Date, or as
otherwise mutually agreed in writing by the Parties, Toshiba has a one-time option [***]* to
terminate its participation in the 3D R/W Project and any further

 

			
	*	 	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.

7

 

payment obligation under Section 6.1(b) (“R/W Termination Option”); provided, however,
that Toshiba must pay SanDisk [***]* under Section 6.1, with any shortfall (between the
[***]* and actual payments made) to be paid to SanDisk according to the original schedule described
in Exhibit A attached hereto. In the event that [***]* provided, however, such period shall
not exceed [***]* months with the following ramp-down manner:

                    (i) During the [***]* following the exercise of the R/W Termination Option: [***]* of
Toshiba’s R/W production existing at the time of the exercise of the R/W Termination Option (the
“Production”) of its 3D Memory Products;

                    (ii) During the [***]* through the [***]* following the exercise of the R/W Termination
Option: [***]* of the Production;

                    (iii) During the [***]* through the [***]* following the exercise of the R/W Termination
Option: [***]* the Production; and

                    (iv) After the [***]* following the exercise of the R/W Termination Option: [***]* of the
Production.

          6.2 Ongoing Compensation Related to [***]*. Upon execution of this Agreement, Toshiba
shall pay SanDisk ongoing fees as set forth below:

               (a) [***]*.

               (b) [***]*.

          6.3 All payments provided for in this Article 6 shall be made without deduction of taxes;
provided, however, that in the event any withholding income tax is imposed by Japanese tax
authorities on any amount payable to SanDisk hereunder, Toshiba may withhold such income tax from
such amount. Toshiba shall without undue delay obtain and send to SanDisk tax certificates
evidencing the tax amount withheld and paid to the Japanese tax authorities.

          6.4 [***]*.

Article 7. COSTS

          7.1 Tool Costs.

               (a) Except as provided in Section 7.1(b), all tools to be used for the R/W development under
the 3D Project (“R/W Tools”) shall be purchased in accordance with [***]*.

               (b) One set of initial tools as set forth in Exhibit C, which are to be uniquely used
for both R/W and OTP backend (non 3D CMOS) development under the 3D Project (“Common Tools”, with
the understanding that such Common Tools listed in Exhibit C may be amended by mutual agreement of
the Parties as required by the 3D Project), and the costs for their installation and hook-up,
shall be purchased and borne by SanDisk, with the understanding that such Common Tools shall be
used as part of the delivery and transfer by SanDisk of 3D Contributions as set forth in Section
2.1 and Exhibit B. The depreciation

 

			
	*	 	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.

8

 

costs which accrue from the development activities under the 3D Project using such Common
Tools shall be allocated [***]* to SanDisk for [***]* and [***]* to [***]* under the 3D
Project. Toshiba will reasonably assist SanDisk [***]* for such Common Tools consistent with
current practice under the Parties’ joint development activities.

               (c) All tools to be uniquely used for development of [***]* shall be solely acquired by or the
acquisition costs thereof shall be solely borne by SanDisk. In the case where [***]* were used for
the purpose of [***]*, the cost incurred as a result of using [***]* for such purpose will be
shared by SanDisk and Toshiba on a [***]* basis as set forth in the [***]*.

          7.2 Non-Tool Costs.

               (a) Except as provided for in Section 7.2(b) and 7.2(c), all non-tool costs for the R/W
development under the 3D Project shall be borne and shared in accordance with the [***]* or, if
such non-tool costs are for production, the applicable joint venture agreement.

               (b) All reasonable non-tool costs (including, but not limited to, [***]*), that are (a)
applicable for both R/W and OTP development under the 3D Project and accruing until [***]*, and (b)
mutually agreed upon, shall be allocated [***]* to SanDisk for [***]* (up to a maximum allocation
of [***]*) and [***]* to [***]*.

               (c) The costs related solely to [***]* shall be borne in their entirety by SanDisk; provided
that to the extent that OTP development and production (yield, ramp, etc.) help R/W or other
non-OTP 3D Memory or 3D Memory Product development, the Committee (as defined in the [***]*) will
discuss and agree to fair and appropriate sharing of related costs.

               (d) The costs related solely to R/W with [***]* (including, but not limited to, [***]* costs)
shall be [***]*.

Article 8. WARRANTY

          8.1 Each Party provides to the other Party its technical information on an “AS-IS” basis only,
and does not make any warranty or representation with respect to such technical information for any
purpose.

          8.2 Each Party represents and warrants to the other that:

               (a) it has the corporate power and authority and the legal right to enter in to this Agreement
and to perform its obligations hereunder; and

               (b) the execution and delivery of this Agreement and the performance of its obligations
hereunder, including the Contributions to be made and the licenses to be granted hereunder by such
Party, do not conflict with or constitute a default under any of its contractual obligations with
any third party.

          8.3 Nothing contained in this Agreement shall be construed as:

 

			
	*	 	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.

9

 

               (a) a warranty or representation that the manufacture, use, sale or other disposal of
semiconductor products by the other Party using any technical information received under this
Agreement will be free from infringement of Patents or any other intellectual property rights of
any third Party;

               (b) conferring the other Party any right to use in advertising, publicity or otherwise any
trademark, trade name or names, or any contraction, abbreviation or simulations thereof of either
Party;

               (c) conferring the other Party, by implication, estoppel or otherwise, any license or other
right, except for the licenses and rights expressly granted hereunder; and

               (d) an obligation to furnish any technical information or know-how except as otherwise
specifically provided herein.

          8.4 Warranty Disclaimer. EXCEPT TO THE EXTENT EXPRESSLY SET FORTH HEREIN, EACH PARTY
MAKES NO WARRANTIES AND DISCLAIMS ALL WARRANTIES, WHETHER EXPRESS, STATUTORY, IMPLIED OR OTHERWISE,
INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND
NON-INFRINGEMENT OF THIRD PARTY RIGHTS REGARDING 3D MEMORY, 3D MEMORY PRODUCT AND ANY TECHNOLOGY OR
CONFIDENTIAL INFORMATION SHARED BY EITHER PARTY PURSUANT TO THIS AGREEMENT.

Article 9. LIMITATION OF LIABILITY

IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, CONSEQUENTIAL,
INCIDENTAL. PUNITIVE OR INDIRECT DAMAGES OF ANY KIND, (INCLUDING LOSS OF PROFIT OR DATA, LOST
REVENUES OR LOSS OF USE) RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE SUBJECT MATTER OF
THIS AGREEMENT OR PERFORMANCE OR FAILURE TO PERFORM HEREUNDER WHETHER DUE TO BREACH OF CONTRACT,
BREACH OF WARRANTY, TORT, OR NEGLIGENCE OF THAT PARTY AND WHETHER OR NOT SUCH PARTY WAS ADVISED OF
OR SHOULD HAVE BEEN AWARE OF THE POSSIBILITY OF SUCH LOSS.

Article 10. CONFIDENTIALITY

          10.1 In this Agreement, “Confidential Information” means information disclosed in
written, recorded, graphical or other tangible from which is marked as “Confidential”,
“Proprietary” or in some other manner to indicate its confidential nature, and/or orally or in
other intangible form, identified as confidential at the time of disclosure and confirmed as
confidential information in writing within thirty (30) days of its initial disclosure.

          10.2 For a period of [***]* from the date of receipt of the Confidential Information
disclosed by one Party (“Disclosing Party”) hereunder, the receiving Party (“Receiving
Party”) agrees to safeguard the Confidential Information and to keep it in

 

			
	*	 	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.

10

 

confidence and to use reasonable efforts, consistent with those used in the protection of its
own confidential information, to prevent its disclosure to third parties other than its
majority-owned subsidiaries, except that the Receiving Party shall not be obligated hereunder in
any way with respect to information which:

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

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

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

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

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

               (f) is disclosed with the prior written consent of the Disclosing Party, provided that each
recipient from the Receiving Party shall execute a confidentiality agreement prohibiting further
disclosure of the Confidential Information, under terms no less restrictive that those provided in
this Agreement;

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

               (h) is required to be disclosed by applicable securities of other laws or regulations,
provided that either Party shall, prior to any such disclosure, provide the other Party with notice
which includes a copy of the proposed disclosure. Further, the disclosing Party shall consider the
other Party’s timely input with respect to the disclosure.

          10.3 Receiving Party shall use its reasonable best efforts to limit dissemination of the
Disclosing Party’s Confidential Information to such of its employees and employees of its
majority-owned subsidiaries who have a need to know such information for the purpose for which such
information was disclosed to it and who are bound to retain the confidentiality under provisions
similar to those set forth herein (“Authorized Recipients”). Receiving Party understands
that disclosure or dissemination of the Disclosing Party’s Confidential Information not expressly
authorized hereunder would cause irreparable injury to the Receiving Party, for which monetary
damages would not be an adequate remedy and the Disclosing Party shall be entitled to equitable
relief in addition to any remedies the Disclosing Party may have hereunder or at law.

          10.4 Nothing contained in this Agreement shall be construed as granting or conferring any
rights, licenses or relationships by the transmission of the Confidential Information.

          10.5 All Confidential Information disclosed hereunder shall remain the property of the
Disclosing Party. Upon request by the Disclosing Party, the Receiving Party

11

 

shall return all Confidential Information, including any and all copies thereof, or certify in
writing that all such Confidential Information had been destroyed.

Article 11. TERM AND TERMINATION

          11.1 This Agreement shall become effective on the Effective Date and continue in full force
and effect until the later of the termination of the: [***]*, unless earlier terminated as
hereinafter provided. The term of this Agreement may be extended by mutual agreement of both
Parties.

          11.2 If either Party fails to perform or breaches any of its material obligations under this
Agreement, then, upon [***]* written notice specifying such failure or breach, the non-defaulting
Party shall have the right to terminate this Agreement forthwith, unless the failure or breach
specified in the notice has been cured during the [***]* period. For the avoidance of doubt, an
intentional substantial failure by SanDisk to perform its obligations with respect to the delivery
and transfer of SanDisk Contributions as provided for in Section 2.1 or Exhibit B shall be deemed
to be a material breach by SanDisk of its obligations under this Agreement. Termination of this
Agreement pursuant to this Section 11.2 shall not relieve the breaching Party from any liability
arising from any breach of this Agreement and such termination shall be without prejudice to any
other rights and remedies of the non-breaching Party provided at law or in equity, in addition to
the rights and remedies set forth in this Agreement. Notwithstanding anything to the contrary
herein, any claims of breach shall follow the dispute resolution procedures set forth in Section
1.04(e) of the [***]*.

          11.3 Either Party shall have the right to terminate this Agreement by giving written notice to
the other Party upon the occurrence of any of the following events:

               (a) the filing by the other Party of a voluntary petition in bankruptcy or insolvency;

               (b) any adjudication that such other Party is bankrupt or insolvent;

               (c) the filing by such other Party of any legal action or document seeking reorganization,
readjustment or arrangement of its business under any law relating to bankruptcy or insolvency;

               (d) the appointment of a receiver for all or substantially all of the property of such other
Party; or

               (e) the making by such other Party of any assignment of whole or substantial assets for the
benefit of creditors.

               This Agreement shall terminate on the thirtieth (30th) day after such notice of termination is
given.

          11.4 The provisions of Articles and Sections 3, 8, 9, 10 and 12, and any payments which become
due pursuant to Article 6 as of the date of termination or expiration of this Agreement, shall
survive any termination or expiration of this Agreement. Upon

 

			
	*	 	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.

12

 

expiration of this Agreement pursuant to Section 11.1, all rights and licenses granted
hereunder Section 4 shall survive such expiration subject to the applicable royalty payments and
terms provided for in Article 6. Upon termination of this Agreement by one Party hereto (the
“terminating Party”) pursuant to Article 11.2 or 11.3, all rights and licenses granted hereunder to
the other Party on which the termination takes effect (the “terminated Party”) shall immediately
terminate according to the terms thereof and such terminated Party shall take reasonable steps to
destroy or, at the terminating Party’s request, return to such terminating Party all technical
information received from the terminating Party in tangible form. All rights and licenses granted
hereunder to the terminating Party shall not be affected by such termination.

Article 12. GENERAL PROVISIONS

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

          12.2 Amendment and Waiver. No amendment to or waiver of this Agreement shall be
effective unless it shall be in writing, identify with specificity the provisions of this Agreement
that are thereby amended or waived and be signed by each Party hereto. Any failure of a Party to
comply with any obligation, covenant, agreement or condition contained in this Agreement may be
waived by the Party entitled to the benefits thereof only by a written instrument duly executed and
delivered by the Party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure of compliance.

          12.3 Severability. If any provision of this Agreement or the application of any such
provision is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement (except as may be expressly
provided in this Agreement) or invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the Parties hereto waive any provision of
law that renders any provision of this Agreement invalid, illegal or unenforceable in any respect.
The Parties hereto shall, to the extent lawful and practicable, use their reasonable efforts to
enter into arrangements to reinstate the intended benefits, net of the intended burdens, of any
such provision held invalid, illegal or unenforceable. If the intent of the Parties for entering
into this Agreement cannot be preserved, this Agreement shall either be renegotiated or terminated
by mutual agreement of the Parties.

          12.4 Assignment. Except as may otherwise be specifically provided in this Agreement,
no Party hereto shall assign or otherwise transfer this Agreement or any of its rights hereunder
(except for any transfer to an Affiliate or in connection with a merger, consolidation or sale of
all or substantially all the assets or the outstanding securities of such Party, which transfer
shall not require any consent of the other Party, [***]*) without the prior written consent
of each other Party hereto (which consent may be withheld in each such other Party’s sole
discretion), and any such purported transfer without such consent shall be void.

 

			
	*	 	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.

13

 

          12.5 Remedies.

               (a) Except as may otherwise be specifically provided in this Agreement, the rights and
remedies of the Parties under this Agreement are cumulative and are not exclusive of any rights or
remedies which the Parties hereto would otherwise have.

               (b) Equitable relief, including the remedies of specific performance and injunction, shall be
available with respect to any actual or attempted breach of this Agreement; provided, however, in
the absence of exigent circumstances, the Parties shall refrain from commencing any lawsuit or
seeking judicial relief in connection with such actual or attempted breach that is contemplated to
be addressed by the dispute resolution process set forth in Section 12.6 hereof until the Parties
have attempted to resolve the subject dispute by following said dispute resolution process to its
conclusion.

          12.6 Arbitration. In the event there is a dispute between the Parties: (a) that
relates to this Agreement, and (b) for which there is no specific dispute resolution process
already set forth in this Agreement to resolve such dispute, the Parties to this Agreement shall
endeavor to settle any dispute that arises between or among them through good faith discussion and
mutual agreement. If the Parties cannot resolve such dispute through good faith discussion and
mutual agreement, then such dispute will be settled by binding arbitration in San Francisco,
California. The dispute shall be heard by a panel of three arbitrators pursuant to the rules of
the International Chamber of Commerce (the “ICC”). The awards of such arbitration shall be
final and binding upon the Parties thereto. Each Party will bear its own fees and expenses
associated with the arbitration. Filing fees and arbitrator fees charged by the ICC shall be borne
equally by the Parties.

          12.7 Parties in Interest; Limitation on Rights of Others. This Agreement shall be
binding upon and inure to the benefit of the Parties hereto and their permitted successors and
assigns. Nothing in this Agreement, whether express or implied, shall give or be construed to give
any Person (other than the parties hereto and their permitted successors and assigns) any legal or
equitable right, remedy or claim under or in respect of this Agreement, unless such Person is
expressly stated in such agreement or instrument to be entitled to any such right, remedy or claim.

          12.8 Headings. The Article and Section headings of this Agreement are for convenience
of reference only and shall not affect the construction of or be taken into consideration in
interpreting any such agreement or instrument.

          12.9 Counterparts; Effectiveness. This Agreement may be executed by the Parties hereto
in separate counterparts, each of which when so executed and delivered shall be an original, but
all of which counterparts shall together constitute but one and the same contract. This Agreement
shall not become effective until one or more counterparts have been executed by each Party hereto
and delivered to the other Parties hereto.

          12.10 Construction. References in this Agreement to any gender include references to
all genders, and references in this Agreement to the singular include references to the plural and
vice versa. Unless the context otherwise requires, the term “party” when used in this Agreement
means a party to this Agreement. References in this Agreement to a party or other Person include
their respective permitted successors and assigns. The words “include”, “includes” and
“including”, when used in this Agreement, shall be deemed to be followed by the phrase “without
limitation”. Unless the context otherwise requires, references

14

 

used in this Agreement to Articles, Sections, Exhibits, Schedules, Appendices and Attachments
shall be deemed references to Articles and Sections of, and Exhibits, Schedules, Appendices and
Attachments to, this Agreement. Unless the context otherwise requires, the words “hereof”,
“hereby” and “herein” and words of similar meaning when used in this Agreement refer to this
Agreement in its entirety and not to any particular Article, Section or provision of this
Agreement.

          12.11 Official Language. The official language of this Agreement is the English
language only, which language shall be controlling in all respects, and all versions of this
Agreement in any other language shall not be binding on the parties hereto or nor shall such other
versions be admissible in any legal proceeding, including arbitration, brought under this
Agreement. All communications and notices to be made or given pursuant to this Agreement shall be
in the English language.

          12.12 No Implied Licenses. All rights not expressly granted hereunder by a Party are
hereby retained in their entirety by such Party. Moreover, there are no implied grants or licenses
hereunder and the only rights or licenses granted to either Party are limited to those rights and
licenses expressly set forth herein.

          12.13 No Implied Consent Requirement. Except for consent requirements that are
expressly set forth herein, no obligations to obtain any consent shall be implied under this
Agreement.

          12.14 Notices. All notices and other communications to be given to any party under
this Agreement shall be in writing and any notice shall be deemed received when delivered by hand,
courier or overnight delivery service, or by e-mail or facsimile (if confirmed within three
Business Days by delivery of a copy by hand, courier or overnight delivery service), or five days
after being mailed by certified or registered mail, return receipt requested, with appropriate
postage prepaid and shall be directed to the address of such party specified below (or at such
other address as such party shall designate by like notice):

     (a) If to Toshiba:

Toshiba Corporation Semiconductor Company

1-1 Shibaura 1-Chome Minato-Ku,

Tokyo 105-8001 Japan

Attention: [***]*

[***]*

[***]*

With a copy to:

Toshiba Corporation Semiconductor Company

Legal Affairs Division

1-1 Shibaura 1-Chome Minato-Ku

Tokyo 105-8001 Japan

Attention: [***]*

[***]*

[***]*

 

			
	*	 	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.

15

 

     (b) If to SanDisk:

SanDisk Corporation

601 McCarthy Boulevard

Attention: President and COO

Milpitas, CA 95035 USA

Telephone: (408) 801-1000

[***]*

With a copy to:

SanDisk Corporation

601 McCarthy Boulevard

Milpitas, CA 95035 USA

Attention: Senior Vice President and General Counsel

Telephone: (408) 801-1000

[***]*

          12.15 Export Laws. Neither Party shall export or re-export, directly or indirectly,
any technical information disclosed hereunder or direct product thereof to any destination
prohibited or restricted by the export control regulations of Japan or the United States, including
the U.S. Export Administration Regulations, without the prior authorization from the appropriate
governmental authorities. Neither Party will use technical information supplied by the other Party
hereunder for any purpose to develop or manufacture nuclear, chemical, biological weapons or
missiles (hereafter “weapons of mass destruction”). Each Party agrees that it will not
knowingly sell any products manufactured using the other Party’s technical information to any third
party if it knows that the end-user of the products will use them for the development and/or
manufacture of the weapons of mass destruction.

          12.16 Resolution of Conflicts. In the event of a conflict between the terms and
conditions set forth in various agreement referenced herein, the order of precedence for such terms
and conditions with respect to the subject matter hereof shall be as follows:

               (a) this Agreement;

               (b) the [***]*; and then

               (c) [***]*.

          12.17 Governing Law. This Agreement shall in all respects be governed by and
construed in accordance with the internal laws of the State of California applicable to agreements
made and to be performed entirely within such state without regard to the conflict of laws
principles of such state, except where Japanese law is mandatory.

          12.18 [***]*.

[Rest of Page Intentionally Blank]

 

			
	*	 	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.

16

 

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate,
as of the date first written above, by their duly authorized officers or representatives.

	 	 	 	 	 	 	 	 	 	 	 
	Toshiba Corporation	 	 	 	SanDisk Corporation	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	Name:

	 	 

Kiyoshi Kobayashi
	 	 	 	Name:
	 	 

Sanjay Mehrotra
	 	 
	Title:

	 	Vice President
	 	 	 	Title:
	 	President and Chief Operating Officer	 	 
	 

	 	Memory Division	 	 	 	 	 	 	 	 
	 

	 	Semiconductor Company	 	 	 	 	 	 	 	 

[Signature Page to 3D Collaboration Agreement]

 

 

EXHIBIT 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.

 

 

EXHIBIT B

[***]*

 

			
	*	 	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.

 

 

EXHIBIT C

[***]*

 

			
	*	 	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.

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