Document:

exv10w1

 

EXHIBIT 10.1

FOIA Confidential Treatment Requested

Execution Version

 

FLASH ALLIANCE MASTER AGREEMENT

Dated as of July 7, 2006

by and among

TOSHIBA CORPORATION,

SANDISK CORPORATION

and

SANDISK (IRELAND) LIMITED

 

 

 

EXHIBIT 10.1

FOIA Confidential Treatment Requested

Execution Version

Table of Contents

  Page  

	 	 	 	 	 
	1. Definitions and Interpretation
	 	 	1	 
	 
	 	 	 	 
	2. Closing and Post-Closing Transactions
	 	 	4	 
	 
	 	 	 	 
	3. Purpose of Flash Alliance
	 	 	7	 
	 
	 	 	 	 
	4. Representations and Warranties of the Parties
	 	 	8	 
	 
	 	 	 	 
	5. Covenants
	 	 	11	 
	 
	 	 	 	 
	6. Covenants concerning NAND Flash Memory Products Business
	 	 	13	 
	 
	 	 	 	 
	7. Other Agreements
	 	 	28	 
	 
	 	 	 	 
	8. Termination
	 	 	32	 
	 
	 	 	 	 
	9. Miscellaneous
	 	 	38	 

 

 

EXHIBIT 10.1

FOIA Confidential Treatment Requested

Execution Version

          This FLASH ALLIANCE MASTER AGREEMENT, dated as of July 7, 2006, is entered into by and among,
on one side, TOSHIBA CORPORATION, a Japanese corporation (“Toshiba”), and, on the other
side, SANDISK CORPORATION, a Delaware corporation (“SanDisk Corporation”), and SANDISK
(IRELAND) LIMITED, a company organized under the laws of the Republic of Ireland (“SanDisk
Ireland,” and collectively with SanDisk Corporation, “SanDisk” and SanDisk together
with Toshiba, the “Parties”).

          WHEREAS, pursuant to that certain New Master Agreement between SanDisk Corporation and
Toshiba, dated as of April 10, 2002, as amended by that certain Amendment to New Master Agreement
between certain of the Parties dated as of August 13, 2002 (the “FVC Japan Master
Agreement”), and the agreements referenced therein, the Parties have had a collaboration for
development and manufacture of FVC Japan NAND Flash Memory Products (as hereinafter defined);

          WHEREAS, pursuant to that certain Flash Partners Master Agreement by and among Toshiba,
SanDisk Corporation and SanDisk (Cayman) Limited, dated as of September 10, 2004 (the “FP
Master Agreement”), and the agreements referenced therein, the Parties have had a collaboration
for development and manufacture of Y3 NAND Flash Memory Products (as defined in the FP Master
Agreement);

          WHEREAS, the Parties desire to extend their collaboration to encompass additional joint
development and manufacture of Y4 NAND Flash Memory Products (as hereinafter defined) to be
produced at the wafer fabrication facility known as “Y4”; and

          WHEREAS, in order to realize these goals, the Parties desire to consummate or cause to be
consummated the transactions described in this Agreement, and any other transactions which the
Parties may from time to time consider necessary or appropriate to carry out the intent of the
Parties as expressed herein.

          NOW, THEREFORE, the Parties agree as follows:

	1.	 	Definitions and Interpretation.
	 
	1.1	 	Certain Definitions.
	 
	(a)	 	Capitalized terms used but not defined in this Agreement shall have the respective
meanings assigned to them in Appendix A (Definitions, Rules of Construction and
General Terms and Conditions).
	 
	(b)	 	As used herein, the term “Agreement” means this Flash Alliance Master
Agreement together with any Exhibits, Schedules, Appendices and Attachments hereto.
	 
	1.2	 	Additional Definitions. The following capitalized terms used in this
Agreement shall have the respective meanings assigned in this Agreement:

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	Term	 	Defined In
	Acquiring Party
	 	Section 8.1(d)
	Alternative Use
	 	Section 6.5(c)(i)
	Amendment No. 4 to Patent Cross License Agreement
	 	Section 2.1(c)(iii)
	Appointing Party
	 	Section 6.9(b)(i)
	[*]
	 	Section 6.5(c)(ii)(B)
	Closing
	 	Section 2.1(a)
	Committee Representatives
	 	Section 6.9(b)(i)
	Common R&D Agreement
	 	Section 2.1(c)(i)
	Common R&D Development Expenses
	 	Section 6.8(a)(i)
	Costs
	 	Section 6.5(c)(i)
	Cross License Agreement
	 	Section 2.1(c)(iii)
	Defaulting Party
	 	Section 6.12(d)
	EC Party/Excess Capacity Party
	 	Section 6.7(b)(i)
	Embedded NAND Product
	 	Section 6.7(c)(ii)
	Employer
	 	Section 6.10(b)(vii)
	Engineers
	 	Section 6.10
	Environmental Indemnification Agreement
	 	Section 2.1(b)(vii)
	Equipment
	 	Section 6.5(c)(i)
	Evaluation Wafers
	 	Section 6.8(a)(iii)
	Financing
	 	Section 6.12(b)(iii)
	Flash Alliance
	 	Section 2.1(b)
	FA Foundry Agreement
	 	Section 2.1(b)(iv)
	FA Operating Agreement
	 	Section 2.1(b)(ii)
	FA Operative Documents
	 	Section 2.1(b)
	FA Patent Indemnification Agreement
	 	Section 2.1(b)(vi)
	FA Termination Date
	 	Section 8.1(b)
	FA Shares
	 	Section 4.2(a)
	FP Master Agreement
	 	Recitals
	FP NAND Flash Memory Products
	 	Section 3.3(a)
	FVC Japan Master Agreement
	 	Recitals
	FVC Japan NAND Flash Memory Products
	 	Section 3.3(a)
	Headcount Plan
	 	Section 6.10

 

			
	*	 	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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	Term	 	Defined In
	ICs
	 	Section 3.2
	Intellectual Property
	 	Section 4.7
	Investing Party
	 	Section 6.5(c)(i)
	Joint Operative Documents
	 	Section 2.1(c)
	Lease Agreement
	 	Section 2.1(b)(viii)
	Management Committee
	 	Section 6.9
	Minimum RUP Commitment
	 	Section 6.5(c)(i)
	Master Operative Documents
	 	Section 2.2
	NAND Flash Memory Integrated Circuits
	 	Section 6.13
	NAND Flash Memory Products
	 	Section 3.2
	NAND Process Technology
	 	Section 6.3(a)
	Non-Defaulting Party
	 	Section 6.12(d)
	Non-Investing Party
	 	Section 6.5(c)(i)
	Non-Originating Party
	 	Section 6.7(e)
	Originating Party
	 	Section 6.7(e)
	Parties
	 	Heading
	Product Development Agreement
	 	Section 2.1(c)(ii)
	Proprietary NAND Flash Memory Products
	 	Section 6.7(d)
	Purchase and Supply Agreements
	 	Section 2.1(b)(v)
	Qualification Wafers
	 	Section 6.8(a)(iv)
	Ramp-Up Plan
	 	Section 6.5(b)
	Remaining Y4 Personnel
	 	Section 8.1(j)
	Requesting Party
	 	Section 8.1(d)(i)
	[*]
	 	Section 6.5(c)(ii)
	[*]
	 	Section __
	SanDisk
	 	Heading
	SanDisk Corporation
	 	Heading
	SanDisk Financing
	 	Section 6.12(b)(iii)
	SanDisk Ireland
	 	Heading
	SanDisk Purchase and Supply Agreement
	 	Section 2.1(b)(v)
	SanDisk Team
	 	Section__
	SanDisk Termination Capacity
	 	Section 8.1(e)(i)
	Selling Party
	 	Section 8.1(d)

 

			
	*	 	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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	Term	 	Defined In
	Share Purchase Agreement
	 	Section 2.1(b)(i)
	Start-Up Costs
	 	Section 6.4
	Termination Capacity
	 	Section 8.1(d)(i)
	Third Party Sale
	 	Section 6.5(c)(i)
	Toshiba
	 	Heading
	Toshiba Financing
	 	Section 6.12(b)(iii)
	Toshiba Foundry NAND Flash Memory Products
	 	Section 3.3(a)
	Toshiba Purchase and Supply Agreement
	 	Section 2.1(b)(v)
	Toshiba-SanDisk Services Agreement
	 	Section 2.1(b)(ix)
	[*]
	 	Section __
	Y3 NAND Flash Memory Products
	 	Section 3.3(a)
	Y3 Ramp-Up Plan
	 	Section __
	Y4 Direct R&D Development Products
	 	Section 6.8(a)(ii)
	Y4 Facility
	 	Section 3.1
	Y4 Facility Target Capacity
	 	Section 7.3(b)
	Y4 NAND Flash Memory Products
	 	Section 3.3(a)
	Y4 Staff
	 	Section 8.1(j)
	[*]
	 	Section __

	1.3	 	Rules of Construction and Documentary Conventions. The rules of construction
and documentary conventions and general terms and conditions set forth in Appendix A
shall apply to this Agreement.
	 
	1.4	 	Precedence. The terms and provisions of this Agreement are binding on the
Parties; provided, however, that to the extent that a description in this Agreement of another
agreement (whether an FA Operative Document or otherwise) conflicts with or differs from the
provisions of that agreement, then the provisions of that agreement shall control as to such
conflict or difference.
	 
	 	 	2. Closing and Post-Closing Transactions
	 
	2.1	 	Closing Transactions.
	 
	(a)	 	Closing. The Parties shall effect the transactions set forth in this Section
2.1, all of which shall be considered to occur on the date hereof unless otherwise stipulated
(the effecting of such transactions, collectively, the “Closing”).

 

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

	 	(i)	 	a Share Purchase Agreement between Toshiba and SanDisk Ireland, dated as of
the date hereof, in the form of Exhibit A1 (the “Share Purchase
Agreement”), and which concerns the sale by Toshiba and purchase by SanDisk
Ireland at the Closing of 49.9% of the FA Shares;
	 
	 	(ii)	 	an Operating Agreement between Toshiba and SanDisk Ireland, dated as of the
date hereof, in the form of Exhibit A2 (the “FA Operating Agreement”),
and which concerns governance of Flash Alliance;
	 
	 	(iii)	 	Articles of Incorporation of Flash Alliance in the form of Exhibit A to the
FA Operating Agreement;
	 
	 	(iv)	 	a Foundry Agreement, dated as of the date hereof, between Flash Alliance and
Toshiba in the form of Exhibit A3 (the “FA Foundry Agreement”);
	 
	 	(v)	 	a Purchase and Supply Agreement, dated as of the date hereof, by and between
Flash Partners and SanDisk Ireland, in the form of Exhibit A4-1 (the
“SanDisk Purchase and Supply Agreement”) and a Purchase and Supply Agreement,
dated as of the date hereof, between Flash Alliance and Toshiba in the form of
Exhibit A4-2 (the “Toshiba Purchase and Supply Agreement” and together
with the SanDisk Purchase and Supply Agreement, the “Purchase and Supply
Agreements”), and which concern the forecasting and purchase commitments by
SanDisk Ireland and Toshiba, respectively, of Y4 NAND Flash Memory Products;
	 
	 	(vi)	 	a Patent Indemnification Agreement between SanDisk Corporation,
[*] and Toshiba, dated as of the date hereof, in the form of
Exhibit A5 (the “FA Patent Indemnification Agreement”), and which
concerns patent indemnification obligations of Toshiba in favor of SanDisk, and
certain contribution obligations of SanDisk with respect to Y4 NAND Flash Memory
Products;

 

			
	*	 	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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	 	(vii)	 	a Mutual Contribution and Environmental Indemnification Agreement between
SanDisk Ireland and Toshiba, dated as of the date hereof, in the form of Exhibit
A6 (the “Environmental Indemnification Agreement”), and which concerns
indemnification obligations of the parties thereto in favor of one another with
respect to Flash Alliance and the Yokkaichi Facility;
	 
	 	(viii)	 	a Lease Agreement between Flash Alliance and Toshiba, as owner of the
Yokkaichi Facility, dated as of the date hereof, in the form of Exhibit A7
(the “Lease Agreement”), and which concerns the leasing of Flash Alliance’s
equipment to Toshiba as owner of the Yokkaichi Facility;
	 
	 	(ix)	 	a Services Agreement between SanDisk Ireland and Toshiba, dated as of the
date hereof, in the form of Exhibit A8 (“Toshiba-SanDisk Ireland Services
Agreement”), and which concerns Toshiba’s provision of certain services to SanDisk
and SanDisk Ireland’s payment to Toshiba for such services;
	 
	 	(x)	 	a Services Agreement between Flash Alliance and Toshiba, as owner of the
Yokkaichi Facility, dated as of the date hereof, in the form of Exhibit A9
(the “Toshiba-Flash Alliance Services Agreement”), and which concerns
Toshiba’s provision of certain services to Flash Alliance and Flash Alliance’s payment
to Toshiba for such services; and
	 
	 	(xi)	 	a Services Agreement between Flash Alliance and SanDisk Ireland, dated as of
the date hereof, in the form of Exhibit A10 (“SanDisk Ireland-Flash
Alliance Services Agreement”), and which concerns SanDisk Ireland’s provision of
certain services to Flash Alliance and Flash Alliance’s payment to SanDisk Ireland for
such services.

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

	 	(i)	 	the Second Amended and Restated Common R&D and Participation Agreement, dated
as of the date hereof, between SanDisk Corporation and Toshiba (the “Common R&D
Agreement”), a copy of which is Exhibit B1 and which concerns
collaboration between the Parties with respect to research and development activities;
	 
	 	(ii)	 	the Second Amended and Restated Product Development Agreement, dated as of
the date hereof, between the SanDisk Corporation and Toshiba (the “Product
Development Agreement”), a copy of which is Exhibit B2 and which concerns
collaboration between the Parties with respect to product development activities; and

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	 	(iii)	 	an Amendment No. 4 to Patent Cross License Agreement, dated as of the date
hereof, between SanDisk Corporation and Toshiba (the “Amendment No. 4 to Patent
Cross License Agreement”), a copy of which is Exhibit B3, amending that
certain Patent Cross License Agreement between SanDisk Corporation and Toshiba, dated
as of July 30, 1997 (as amended by Amendment No. 1 to Patent Cross License Agreement,
dated as of May 9, 2000, Amendment No. 2 to Patent Cross License Agreement, dated as
of April 10, 2002, and Amendment No. 3 to Patent Cross License Agreement, dated as of
September 10, 2004, the “Cross License Agreement”), and which concerns certain
patent licenses granted by SanDisk Corporation and Toshiba to one another.

	2.2	 	Further Assurances. Following the Closing, each Party shall, and shall cause
its Affiliates and Flash Alliance to, take all reasonable actions necessary or appropriate to
effectuate the transactions contemplated by this Agreement, the FA Operative Documents and the
Joint Operative Documents (collectively, the “Master Operative Documents”), and to
obtain (and cooperate with the other Party in obtaining) any Governmental Action or third
party consent required to be obtained or made by it in connection with any of the transactions
contemplated by the Master Operative Documents; provided, that no Burdensome Condition shall
be made to exist with respect to such Party or any of its Affiliates in connection therewith.
	 
	2.3	 	Continuation of FVC Japan and FP Documents. The Parties agree that unless
otherwise expressly stated herein (A) neither the FVC Japan Operative Documents nor the FP
Operative Documents shall affect the interpretation of this Agreement, the governance or
operation of Flash Alliance or the Y4 Facility and (B) the FA Operative Documents shall not
affect the interpretation of the FVC Japan Master Agreement, the FP Master Agreement, the
governance or operation of FVC Japan or the FVC Japan Equipment or the governance or operation
of Flash Partners; provided, however, that Section 6.3(c)(iv) of the FP Master Agreement is
hereby amended to preclude expansion under Section 6.4(a)(ii)(c) of the FP Master Agreement.
	 
	3.	 	Purpose of Flash Alliance
	 
	3.1	 	Purpose. The Parties acknowledge and agree that the purpose of the Master
Operative Documents and Flash Alliance is the manufacture, including by subcontract to Toshiba
pursuant to the FA Foundry Agreement, and sale to Toshiba and SanDisk Ireland of NAND Flash
Memory Products manufactured at the facility of Flash Alliance known by the Parties as “Y4”
(the “Y4 Facility”), which is a part of the Yokkaichi Facility (defined in
Appendix A).
	 
	3.2	 	NAND Flash Memory Products. “NAND Flash Memory Products” are NAND
(both binary and MLC Flash Memory) Flash Memory Integrated Circuits (“ICs”), excluding
any products with process design rules generally greater than .25 microns. Embedded IC’s
incorporating NAND Flash Memory Products shall be

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	 	 	considered to constitute “NAND Flash
Memory Products” if the main function
and value of such IC is flash memory,
but shall not be considered to
constitute “NAND Flash Memory Products”
if the main function and value of such
IC is logic. For the purpose of the
foregoing, the “main function and
value” of any product shall be
considered to be flash memory if (x)
the total NAND flash memory array area
is greater than [*]of the
total die area or (y) the product is a
cut-down or derivative of a standard
NAND Flash Memory Product.

	3.3	 	Products.
	 
	(a)	 	NAND Flash Memory Products manufactured at the Y4 Facility are referred to as “Y4
NAND Flash Memory Products;” NAND Flash Memory Products manufactured at the Y3 Facility
are referred to as “Y3 NAND Flash Memory Products;” NAND Flash Memory Products
manufactured for FVC Japan using the FVC Japan Equipment are referred to as “FVC Japan
NAND Flash Memory Products;” and NAND Flash Memory Products manufactured at the Toshiba
Foundry Facility (defined in Appendix A) are referred to as “Toshiba Foundry NAND
Flash Memory Products”.
	 
	(b)	 	Each Party shall be permitted to market and sell all NAND Flash Memory Products to
any third party in any form, including chips, packaged devices, wafers, die and cards.
	 
	 	 	4. Representations and Warranties of the Parties
	 
	 	 	Except as may be disclosed in disclosure schedules attached to this Agreement, each Party
represents and warrants to the other Party, as of the Closing, as follows:
	 
	4.1	 	Organization, Ownership Interest, etc.
	 
	(a)	 	It and each of its Affiliates that is a party to any Master Operative Document is
duly organized, validly existing and in good standing under the laws of its jurisdiction of
organization or incorporation and has the power and authority to carry on its business as
conducted on the date hereof, to own or hold under lease its properties and to enter into and
perform its obligations under each Master Operative Document to which it is a party.
	 
	(b)	 	It and each of its Affiliates that is a party to any Master Operative Document is
duly qualified to own or lease its properties and generally to conduct its business as
currently, or proposed under the Master Operative Documents to be, conducted in each
jurisdiction necessary for purposes of the transactions contemplated by the

 

			
	*	 	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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	 	 	Master Operative Documents, except where failure to so
qualify would not have a material adverse effect on
either Party or Flash Alliance.

	4.2	 	Authorization; No Conflict.
	 
	(a)	 	It and each of its Affiliates has duly authorized by all necessary action (i) the
execution, delivery and performance of each Master Operative Document to which it or any of
its Affiliates is a party and (ii) the exercise of its rights as a holder of shares
(kabushiki) of Flash Alliance (the “FA Shares”) to approve the execution, delivery and
performance by Flash Alliance of each Master Operative Document to which it is a party and for
which the approval of the holders of FA Shares is required.
	 
	(b)	 	Its and each of its Affiliates’ execution and delivery of each Master Operative
Document to which it is a party, its and each of its Affiliates’ consummation of the
transactions contemplated thereby and its and each of its Affiliates’ compliance therewith
does not and will not (i) require any approval of its or any of such Affiliates’ stockholders
or any approval or consent of any trustee or holder of any of its or any of such Affiliates’
Indebtedness or obligations, (ii) contravene any Governmental Rule applicable to or binding on
it or any of such Affiliates or any of its or their properties if such contravention would
have a material adverse effect on it or any of such Affiliates or on its or their ability to
perform any of its or any of such Affiliates’ obligations under any Master Operative Document,
(iii) contravene or result in any breach of, or constitute any default, with or without the
passage of time, the giving of notice or both, under its charter or by-laws, or contravene or
result in any breach of or constitute any default under, or result in the creation of any Lien
(other than Permitted Liens) upon any of its or any of such Affiliates property or the
property of Flash Alliance under, any material indenture, mortgage, chattel mortgage, deed of
trust, conditional sales contract, loan or credit agreement, non-compete agreement, license
agreement, partnership or joint venture agreement or other material agreement or document to
which it or any of such Affiliates is a party or by which it or any of such Affiliates or any
of its or their properties is or is intended to be bound or by which Flash Alliance or any of
its properties is or is intended to be bound, (iv) require any negotiation with, or notice to,
any labor union or violate, or require any procedure to be followed under, any collective
bargaining or other agreement with employees or (v) require any Governmental Action (other
than immaterial Governmental Actions such as routine qualifications to do business intended to
be obtained as needed or Governmental Actions needed in connection with the construction and
operation of the Y4 Facility), except, in each case described in clauses (i) through (v)
above, such as have been duly obtained, made, taken or otherwise accomplished and which are in
full force and effect. All consents and approvals of any Governmental Authority (other than
immaterial Governmental Actions such as routine qualifications to do business intended to be
obtained as needed or Governmental Actions needed in connection with the operation of the Y4
Facility) or other third Person necessary or advisable for such

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	 	 	Party or any of its Affiliates to consummate
in all material respects the transactions
contemplated by the Master Operative
Documents have been obtained. No Burdensome
Condition exists with respect to such Party,
any of its Affiliates or Flash Alliance in
connection with the transactions contemplated
by the Master Operative Documents.

	4.3	 	Enforceability.
	 
	(a)	 	It has duly executed and delivered this Agreement and, upon the execution and
delivery of this Agreement by the other Party, this Agreement will constitute its legal, valid
and binding obligation, enforceable against it in accordance with its terms except as
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance or similar laws
affecting the enforcement of creditors’ rights generally or the availability of equitable
remedies (regardless of whether enforceability is considered in a proceeding at law or in
equity).
	 
	(b)	 	It and each of its Affiliates have duly executed and delivered each other Master
Operative Document to which it or any such Affiliate is a party and, upon the execution and
delivery of each such other Master Operative Document by each other party thereto, each such
other Master Operative Document will constitute its legal, valid and binding obligation,
enforceable against it or its Affiliates in accordance with its terms except as enforceability
may be limited by bankruptcy, insolvency, fraudulent conveyance or similar laws affecting the
enforcement of creditors’ rights generally or the availability of equitable remedies
(regardless of whether enforceability is considered in a proceeding at law or in equity).
	 
	4.4	 	Proceedings. There are no actions, claims, investigations or proceedings
pending, or to its knowledge threatened, by or before any Governmental Authority that, if
adversely determined, would have a material adverse effect on it or any of its Affiliates that
is a party to any Master Operative Document or, on the conduct of the business of Flash
Alliance following the Closing as contemplated in the Master Operative Documents or on it or
any of its Affiliates’ ability to perform any material obligation under any Master Operative
Document.
	 
	4.5	 	Litigation; Decrees. Except as set forth in Schedule 4.5, there are
no lawsuits, arbitrations or other legal proceedings pending, or to its knowledge threatened,
by or against or affecting it or any of its Affiliates or any of their respective properties
that (i) are reasonably likely, based on information known to it as of the date hereof, to
have a material adverse effect on the conduct of the business of Flash Alliance following the
Closing as contemplated by the Master Operative Documents or (ii) relate to any of the
transactions contemplated by the Master Operative Documents in a manner which is material to
it, any of its Affiliates’ or Flash Alliance’s ability of it to carry out the transactions
contemplated hereby and in the FA Operative Documents or which could have a material adverse
effect on the conduct of the business of Flash Alliance following the Closing as contemplated
in the Master Operative Documents.

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	4.6	 	Compliance with Other Instruments. Neither it nor any of its Affiliates that
is a party to any Master Operative Document is in default in any material respect in the
performance of any material obligation, agreement, instrument or undertaking to which it or
any of its Affiliates is a party or by which it or any of its Affiliates or any of its of
their properties is bound, and there is no such obligation, agreement, instrument or
undertaking to which it or any of its Affiliates is a party or by which it or any of its
Affiliates or any of its or their properties is bound, in each case which is reasonably likely
to have a material adverse effect on the conduct of the business of Flash Alliance following
the Closing as contemplated by the Master Operative Documents.
	 
	4.7	 	Patents and Proprietary Rights. Except as set forth in Schedule 4.7,
to its knowledge, it owns or possesses sufficient legal rights to all patents, utility models,
trademarks, service marks, trade names, copyrights, applications for any of the foregoing,
mask works, software, trade secrets, licenses, information and proprietary rights and
processes (collectively, “Intellectual Property”) necessary (i) to carry out its or
any of its Affiliates’ obligations under the Master Operative Documents and (ii) for the
conduct of the business of Flash Alliance following the Closing as contemplated in the Master
Operative Documents, without any conflict with or infringement of the rights of others, except
as will not have a material adverse effect on either (i) or (ii) above. Except with respect
to items referenced in Schedule 4.7, it has not received any communications alleging
that its Intellectual Property violates, or by its or any of its Affiliates entering into the
transactions contemplated by the Master Operative Documents, would violate the Intellectual
Property of any other Person or entity, which violation could reasonably be expected to have a
material adverse effect on either (i) or (ii) above.
	 
	4.8	 	Compliance with Laws. It and each of its Affiliates has complied and is
complying in all material respects with all laws, statutes, permit requirements, licensing
requirements, rules and regulations and judicial or administrative decisions, except where the
failure to so comply would not have a material adverse effect on its or any of its Affiliates
ability to perform its or their obligations hereunder or under any other Master Operative
Document or on the conduct of the business of Flash Alliance following the Closing as
contemplated by the Master Operative Documents.
	 
	4.9	 	Patent Cross Licenses. Except as set forth on Schedule 4.9, with
respect to (a) Toshiba, there are no patent cross licenses between it and any third party that
would require Flash Alliance to make any payment pursuant to Section 10 of the Cross License
Agreement, and (b) SanDisk, there are no patent cross licenses between it and any third party
that would require Flash Alliance to make any payment pursuant to Section 8 of the Cross
License Agreement.
	 
	5.	 	Covenants
	 
	5.1	 	Covenants of the Parties. Each Party agrees that, during the term of this
Agreement:

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	(a)	 	Performance of Obligations. It and each of its Affiliates shall fully and
faithfully carry out (i) all its obligations under each Master Operative Document to which it
or any Affiliate is a party, and (ii) once agreed, each applicable Business Plan (as defined
in the FA Operating Agreement).
	 
	(b)	 	Ownership Interest. Except as otherwise expressly permitted by the FA
Operating Agreement and this Agreement, it shall not Transfer or permit any of its Affiliates
to Transfer all or any portion of its FA Shares (or all or any portion of its interest in any
Affiliate through which it beneficially owns its FA Shares), to any Person without the consent
of the other Party.
	 
	5.2	 	Public Announcements.
	 
	(a)	 	At or following the Closing, neither Party shall, nor shall it permit any of its
Affiliates to, without the prior written consent of the other Party:

	 	(i)	 	issue any public release, announcement or other document, or otherwise
publicly disclose any information or make any public statement, concerning the
operations of Flash Alliance or that refers to the other Party or any of its
Affiliates in connection therewith (other than a general reference to affiliation with
Flash Alliance) that (A) concerns the financial condition or results of operations of
Flash Alliance other than as required by any Governmental Rule, Japanese GAAP,
Japanese GAAS, US GAAP or US GAAS, with respect to the financial disclosure
obligations of either Party or (B) disparages either Party, or Flash Alliance’s
performance or reflects negatively on either Party’s commitment to either of Flash
Alliance; or
	 
	 	(ii)	 	other than as may be required in connection with filings required to be made
with Governmental Authorities with respect to the transactions contemplated by the FA
Operative Documents pursuant to the Japanese Foreign Exchange and Foreign Trade Law
and related regulations, (A) publicly file all or any part of any Master Operative
Document or any description thereof or (B) issue or otherwise make publicly available
any press release, announcement or other document that contains Confidential
Information belonging to the other Party (or its Affiliates) or Flash Alliance, except
as may be required by any applicable Governmental Rule, in which case such Party shall
(or shall cause the Person required to make such filing to) cooperate with the other
Party, to the extent reasonable and practicable, in obtaining any confidential
treatment for such filing requested by the other Party.

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

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	5.3	 	Expenses. Each Party shall bear its own expenses in connection with the
negotiation, execution and delivery of the Master Operative Documents.
	 
	5.4	 	Undertaking as to Affiliate Obligations. Each Party shall cause all
covenants, conditions and agreements to be performed, observed or satisfied by each of its
Affiliates that is a party to any Master Operative Documents to be fully and faithfully
observed, performed and satisfied by such Affiliate, and shall not cause or permit to exist
(i) an Event of Default with respect to such Affiliate or (ii) except as otherwise permitted
by the FA Operating Agreement, any event of dissolution of Flash Alliance caused by such
Affiliate. Nothing in Section 5.1 or in this Section 5.4 shall be construed to create any
right in any Person other than the Parties. Without limiting the generality of the foregoing,
SanDisk hereby guarantees the obligations of SanDisk Ireland hereunder and under any Master
Operative Document to which SanDisk Ireland is a party.
	 
	5.5	 	Continuity and Maintenance of Operations. During the term of this Agreement,
each Party agrees on behalf of itself and each of its Affiliates that is a party to any Master
Operative Document to use all reasonable efforts consistent with past practice and policies to
(i) preserve intact in all material respects its and their present business operations, (ii)
keep available the services of its and their key employees as a group, and (iii) preserve its
relationships with suppliers, licensors, licensees, and others having business relationships
with it or them, each to the extent necessary to allow it and such Affiliates to perform its
and their obligations under the Master Operative Documents and to allow Flash Alliance to
conduct its business as contemplated in its most recently approved Business Plan.
	 
	5.6	 	Certain Deliveries and Notices. Each Party shall promptly inform in writing
the other Party of (i) any event or occurrences which could be reasonably expected to have a
material adverse effect on its or any of its Affiliates’ ability to perform its or their
obligations under any of the Master Operative Documents or the ability of Flash Alliance to
conduct its business as contemplated in its most recently approved Business Plan, or (ii) any
breach or failure to satisfy any condition or covenant contained herein or in any other Master
Operative Document by such Party or any of its Affiliates.
	 
	6.	 	Covenants concerning NAND Flash Memory Products Business
	 
	6.1	 	New Technology Development.
	 
	(a)	 	Immediately after the Effective Date, each Party shall designate three (3)
appropriate individuals who will constitute the Common R&D Representatives. The Common R&D
Representatives will meet regularly (quarterly) to review, discuss and determine direction of
NAND future project plans and SanDisk participation in the Development Work (as defined in the
Common R&D Agreement). SanDisk will send, and Toshiba will receive, such number of SanDisk
Personnel as are mutually agreed upon, at AMC or other Toshiba facilities during the term of
the Common R&D Agreement in order for SanDisk to

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	 	 	participate in the Development Work. The Parties have agreed to encourage utilization of
tool vendors to perform Development Work where it is effective to do so.
	 
	(b)	 	Provided Toshiba continues to develop and advance NAND Flash Memory technology for
the benefit of both parties pursuant to the FVC Japan Operative Documents, the FP Operative
Documents, the FA Operative Documents and the other Joint Operative Documents, SanDisk agrees
to share Toshiba’s Common R&D expenditures and shall pay to Toshiba its portion of such Common
R&D expenditures as detailed in the Common R&D Agreement.
	 
	6.2	 	Purchased Tools. All tools for the Y4 Facility shall be purchased by Flash
Alliance (or a lessor for Flash Alliance’s benefit as contemplated by Section 6.12(a)) and all
such purchases shall be agreed upon by the Parties. Toshiba shall, from the Toshiba
Semiconductor Company headquarters and at its own expense, provide Flash Alliance with tool
purchase service and support and negotiate with vendors on Flash Alliance’s behalf, and
SanDisk shall have the right to participate in such negotiations or other tool purchase
activities of Toshiba, at SanDisk’s own expense. For such purpose, a joint SanDisk/Toshiba
tool procurement team (“Joint Tool Procurement Team”) will be formed and each member
of the team will have total participation, visibility and responsibility in tool selection and
procurement negotiations, including tool evaluation activities of the Joint Procurement Team.
Toshiba Semiconductor Company will provide to Flash Alliance the full benefit of its volume
purchase agreements in order to maximize efficiency and minimize costs. Immediately after the
effective date of this Agreement, the Parties will establish a process that enables equal
participation and equal decision making by the Parties in tool evaluation and purchase
(depending on SanDisk’s ability to participate).
	 
	6.3	 	Technology Transfers.
	 
	(a)	 	Toshiba will make available to Flash Alliance its 70 nanometer [*] process
technology applicable to the manufacturing and testing of NAND Flash Memory Products
(“NAND Process Technology”) on the fastest practicable schedule. All technology
transfers will be jointly reviewed and discussed by the Parties and all technology transfers
will be made in a mutually satisfactory manner, provided that all process integration for new
processes will be led by Toshiba employees at the Yokkaichi Facility to the extent reasonably
possible. Toshiba will cause its employees, including its advanced microelectronics center
employees, to cooperate in achieving an efficient transition from development module to
operating process and volume production. Substantially all tests for 300

 

			
	*	 	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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	 	 	millimeter NAND technology will be conducted at the pilot line established at the Y3
Facility or Y4 Facility.
	 
	(b)	 	Whenever a technology transfer is required hereunder, Toshiba shall deliver such
level of NAND Process Technology to the Y4 Facility as would be normal practice by the Toshiba
Semiconductor Company whenever it transfers a technology to a new manufacturing facility or
transfers a new or advanced technology to an existing manufacturing facility in order to
achieve successful implementation of the newly transferred technology.
	 
	(c)	 	A technology transfer hereunder shall be deemed complete when the transferred
technology passes a reasonable qualification procedure to be mutually agreed upon by the
Parties.
	 
	(d)	 	[*]
	 
	(e)	 	[*]
	 
	6.4	 	Start-Up Services for Y4. The Parties acknowledge that either or both of the
Parties and Flash Alliance have incurred or will incur costs in connection with developing
Flash Alliance and the Y4 Facility and preparing the Y4 Facility for production, including
personnel costs, materials costs and other operating expenses, that are properly allocable to
Flash Alliance and for which each Party has the obligation ultimately to bear 50% of the
responsibility (“Start-Up Costs”). The Parties shall discuss in good faith and agree
upon the Start-Up Costs, the allocation to Flash Alliance of Start-Up Costs borne by either
Party and the means and timing of each Party, as applicable, being reimbursed or credited for
having incurred more than 50% of the Start-Up Costs or of making payments due to having
incurred less than 50% of the Start-Up Costs.
	 
	6.5	 	Y4 Facility Ramp-Up Plan.
	 
	(a)	 	Equal Participation and Purchase Price Per Unit. The Parties intend to meet
demand for increased capacity by equally investing in, and jointly building, and sharing, on
equal or substantially equal terms, equal amounts of new capacity for Y4 NAND Flash Memory
Products, except as they may otherwise agree as contemplated herein. Where the Parties
purchase the same output volume of equivalent Y4 NAND Flash Memory Products, the Parties will
pay the same purchase price per unit.
	 
	(b)	 	Ramp-Up Plan. The Parties acknowledge that they intend to expand their Y4
NAND Flash Memory Product manufacturing capacity through development of the Y4 Facility
according to volumes and timing set forth in Schedule 6.5(b) (including to
[*]L/M, the “Ramp-Up Plan”). The Parties will discuss in good faith whether
the production capacity of Y4 should be expanded by the Parties toward the Y4 Facility’s
targeted capacity of approximately [*] L/M.

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

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

	6.6	 	Capacity.
	 
	(a)	 	Priority.

	 	(i)	 	[*]
	 
	 	 	 	(A) [*]
	 
	 	 	 	(B) [*]
	 
	 	 	 	(C) [*]
	 
	 	 	 	(D) [*]
	 
	 	 	 	(E) [*]

 

			
	*	 	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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	 	(ii)	 	[*]
	 
	 	 	 	(A) [*]
	 
	 	 	 	(B) [*]
	 
	 	 	 	(C) [*]
	 
	 	 	 	(D) [*]
	 
	 	 	 	(E) [*]
	 
	 	(iii)	 	[*]

	(b)	 	[*]
	 
	(c)	 	Technology Transfer. If the Parties mutually agree to secure external
manufacturing sources other than the Yokkaichi Facility through joint investment, Flash
Alliance and Toshiba, as applicable, will jointly transfer the applicable manufacturing
technology and know-how to such source. Flash Alliance and Flash Partners (with respect to
300 millimeter wafers) and FVC Japan (with respect to 200 millimeter wafers) will conduct all
negotiations with the external manufacturing source; provided, however, the terms and
conditions of any agreement shall be subject to prior consultation with and the approval of
Toshiba. In connection with any technology transfer to such external source, Toshiba will be
reimbursed its mutually agreed transfer costs for assisting in the transfer of manufacturing
technology and know-how. If the new capacity secured at such external manufacturing source is
requested by only one of the Parties, such Party will pay the transfer costs and be entitled
to purchase the full output of NAND Flash Memory Products purchased by FVC Japan, Flash
Partners or Flash Alliance, as applicable, from such external manufacturing source. If both
Parties request such new external capacity, then FVC Japan, Flash Partners or Flash Alliance,
as applicable, will pay the transfer costs to Toshiba. Neither Party shall have the right to
grant manufacturing licenses to such external manufacturing source or to disclose or transfer
to any such external manufacturing source, manufacturing know-how related to the manufacture
of NAND Flash Memory Products, except through FVC Japan, Flash Partners or Flash Alliance.
	 
	6.7	 	Capacity Sharing Arrangement.
	 
	(a)	 	Equal right to capacity. Subject to Section 6.5(c), each of the Parties will
have the right and obligation, through Flash Alliance, to utilize 50% of the wafers produced
at the Y4 Facility based on a measure of equivalent lots out per week

 

			
	*	 	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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	 	 	with the equivalency being weighed based on the process complexity factors (as calculated
by a formula to be mutually determined by the Parties) of the Y4 NAND Flash Memory
Products.
	 
	(b)	 	Alternative use of allotted capacity.

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

	 	(A)	 	An EC Party may request the other Party to negotiate the terms of
transfer of its capacity shortfall to the other Party, which may choose
whether to accept such additional capacity and on what terms in its sole
discretion.
	 
	 	(B)	 	An EC Party may use its capacity for Embedded NAND Products, as
defined in and subject to Section 6.7(c).
	 
	 	(C)	 	An EC Party may use its capacity for Proprietary NAND Flash Memory
Products and non-Proprietary NAND Flash Memory Products, in accordance with
and subject to Sections 6.7(d) and (e).

	 	 	 	If an EC Party is not able to utilize or transfer its allotted capacity pursuant to
Section 6.7(b), it shall pay the incremental cost increase to the Party not
experiencing a shortfall (or pay to Flash Alliance an under-utilization fee in
accordance with a formula to be mutually determined by the Parties).
	 
	 	(ii)	 	If both Parties are EC Parties because demand for both Parties’ Y4 NAND
Flash Memory Products are significantly below expectations, the Parties will discuss
in good faith whether to permit products which are not Y4 NAND Flash Memory Products
to be produced at the Y4 Facility; provided that (A) the inability of the Parties so
to agree shall not constitute a Deadlock (as defined in the FA Operating Agreement)
and (B) the foregoing shall not limit either Party’s rights in the remainder of this
Section 6.7.

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

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	 	 	with the other Party. Proprietary NAND Flash Memory Products may be produced at the Y4
Facility so long as such products [*] If a Party exercises such option, it must [*] No
such Proprietary NAND Flash Memory Products may be run if doing so [*] Each Party shall
give the other Party at least ninety (90) days’ advance written notice of its intention to
use a portion of its allocated capacity to manufacture Proprietary NAND Flash Memory
Products and the Parties shall refer the matter to the Board of Directors for consultation
and planning, with the intention to minimize the impact of such allocation. Such notifying
Party will limit the output volume of such Proprietary NAND Flash Memory Products to
[*] of such Party’s total allocated output at the Y4 Facility unless it
receives the consent of the other Party to an increase in such output volume above such
limit.
	 
	(e)	 	Each Party (the “Originating Party”) shall inform the other (the
“Non-Originating Party”) of the development plans by the Originating Party to develop
NAND Flash Memory Products, and the Originating Party and the Non-Originating Party shall each
refer such matter to the Coordinating Committee (as defined in the Product Development
Agreement). If the Coordinating Committee unanimously decides that such planned development
shall be undertaken jointly, then the cost of such joint development shall be borne by each
Party in accordance with the Product Development Agreement, and the NAND Flash Memory Products
manufactured following such joint development shall be considered non-Proprietary NAND Flash
Memory Products for purposes of Section 6.7(d); provided, however, the NAND Flash Memory
Products set forth in Exhibit A to the Product Development Agreement shall be deemed
to be non-Proprietary NAND Flash Memory Products without any action by the Coordinating
Committee. Subject to the foregoing, if the Coordinating Committee does not unanimously
decide that such planned development shall be undertaken jointly, then the Originating Party
may, at its sole discretion, either (i) transfer to the Non-Originating Party the technology,
including the items in Exhibit C to the Product Development Agreement relating to such
technology, used to manufacture such NAND Flash Memory Products on a royalty-free basis,
whereupon such NAND Flash Memory Products shall be considered non-Proprietary NAND Flash
Memory Products, or (ii) treat such NAND Flash Memory Products as Proprietary NAND Flash
Memory Products for purposes of Section 6.7(d). In the event the Originating Party elects to
treat any NAND Flash Memory Products as Proprietary NAND Flash Memory Products in accordance
with the preceding sentence, but thereafter the Coordinating Committee unanimously determines
that such Proprietary NAND Flash Memory Products should be developed jointly, the Originating
Party shall transfer to the other Party the technology used to manufacture such NAND Flash
Memory Products on reasonable terms and conditions to be mutually agreed upon by the Parties,
whereupon such Proprietary

 

			
	*	 	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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	 	 	NAND Flash Memory Products shall be treated as non-Proprietary NAND Flash Memory Products.
	 
	6.8	 	Engineering Wafers and Development Expense. Each Party will have full access
to all operational and engineering data and reports related to engineering wafers manufactured
at Y4.
	 
	(a)	 	Engineering wafers and development expenses are further and more completely defined
in four categories: Common R&D Development Expenses, Y4 Direct R&D Development Products,
Evaluation Wafers, Qualification Wafers (each as defined below).

	 	(i)	 	“Common R&D Development Expenses” means [*]. The Parties
agree to set up pilot-line(s) [*]. The Parties confirm their intent that [*]
Notwithstanding the foregoing, the Parties shall meet from time to time [*] The
Parties shall meet at the end of each quarter to determine if any engineering
activities performed during the quarter [*], whether agreed in advance or not, [*].
If any activities performed [*] are agreed by the parties to [*]
	 
	 	(ii)	 	[*]
	 
	 	(iii)	 	“Evaluation Wafers” are those wafers manufactured [*] Both parties
are entitled to receive evaluation wafers [*] The cost of Evaluation Wafers is [*]
	 
	 	(iv)	 	“Qualification Wafers” are those wafers [*] The Parties will
discuss and agree on the appropriate quantity of Qualification Wafers required for
each Y4 NAND Flash Memory Product. [*].

	(b)	 	[*].
	 
	6.9	 	Creation of Management Committee. The management committee established by
the Parties pursuant to the FVC Japan Master Agreement and the FP Master Agreement to
facilitate management of the respective operations of FVC Japan and Flash Partners (the
“Management Committee”) shall do the same for Flash Alliance, as detailed in this
Section 6.9.
	 
	(a)	 	Authority. The Management Committee shall have the authority to (i) advise
Flash Alliance with respect to policy and operating matters common to Toshiba and SanDisk as
well as on such other matters as Flash Alliance may refer to the

 

			
	*	 	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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	 	 	Management Committee from time to time, (ii) hear and seek to resolve any disputes
regarding operational matters or alleged breaches of any Master Operative Documents
(including dispute resolution), and (iii) take the actions specified to be taken by the
Management Committee in this Agreement or any Master Operative Document, including in this
Section 6.9 and in Section 6.3.
	 
	(b)	 	Members of the Management Committee; Voting; etc.

	 	(i)	 	The Management Committee shall consist of six members (the “Committee
Representatives”), three of whom shall be appointed by Toshiba, and three of whom
shall be appointed by SanDisk (for such purpose, each of the Parties is referred to in
this Section 6.9 as an “Appointing Party”). Each Appointing Party shall be
entitled to appoint an alternate Committee Representative to serve in the place of any
Committee Representative appointed by such Appointing Party should any such Committee
Representative be unable to attend a meeting. Each Party shall be entitled to invite
a reasonable numbers of observers to all Management Committee meetings.
	 
	 	(ii)	 	Each Committee Representative or alternate Committee Representative shall
serve at the pleasure of the designating Appointing Party and may be removed as such,
with or without cause, and his successor designated, by the designating Appointing
Party. Each Appointing Party shall have the right to designate a replacement
Committee Representative in the event of any vacancy among such Appointing Party’s
appointees.
	 
	 	(iii)	 	Each Appointing Party shall bear any cost and expense incurred by any
Committee Representative or alternate Committee Representative designated by such
Appointing Party to serve on the Management Committee, and no Committee Representative
or alternate Committee Representative shall be entitled to compensation from Flash
Alliance for serving in such capacity.
	 
	 	(iv)	 	Each Appointing Party shall notify the other Appointing Party and Flash
Alliance in writing of the name, business address and business telephone and facsimile
numbers of each Committee Representative and each alternate Committee Representative
that such Appointing Party has been appointed to the Management Committee. Each
Appointing Party shall promptly notify the other Appointing Party and Flash Alliance
of any change in such Appointing Party’s appointments or of any change in any such
address or number.
	 
	 	(v)	 	For purposes of any approval or action taken by the Management Committee,
each Committee Representative shall have one vote. All of the votes eligible to be
cast at any meeting must be voted in favor of any action to be taken by the Management
Committee at such meeting.

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	 	(vi)	 	At any meeting of the Management Committee, a Committee Representative, in
the absence of one or more other Committee Representatives appointed by the same
Appointing Party or an alternate Committee Representative, may cast the vote such
absent Committee Representatives would otherwise be entitled to cast.
	 
	 	(vii)	 	The quorum necessary for any meeting of the Management Committee shall be
those Committee Representatives entitled to cast all of the votes held by the members
of the Management Committee. A quorum shall be deemed not to be present at any
meeting for which notice was not properly given under Section 6.9(c), unless the
Committee Representative or Committee Representatives as to whom such notice was not
properly given attend(s) such meeting without protesting the lack of notice or duly
execute(s) and deliver(s) a written waiver of notice or a written consent to the
holding of such meeting.
	 
	 	(viii)	 	Each appointment by an Appointing Party to the Management Committee shall
remain in effect until the Appointing Party making such appointment notifies the other
Appointing Party and Flash Alliance in writing of a change in such appointment. The
resignation or removal of a Committee Representative shall not invalidate any act of
such Committee Representative taken before the giving of such written notice of the
removal or resignation of such Committee Representative (or alternate Committee
Representative).

	(c)	 	Meetings, Notice, etc.

	 	(i)	 	Meetings of the Management Committee shall be held at such location or
locations as may be selected by the Management Committee from time to time.
	 
	 	(ii)	 	Regular meetings of the Management Committee shall be held on such dates and
at such times as shall be determined by the Management Committee and shall be held as
required or as requested by the Board of Directors.
	 
	 	(iii)	 	Notice of any regular meeting or special meeting pursuant to Section
6.9(c)(iv) shall be given to each Committee Representative at least ten (10) Business
Days prior to such meeting in the case of a meeting in person or at least five (5)
Business Days prior to such meeting in the case of a meeting by conference telephone
or similar communications equipment pursuant to Section 6.9(c)(vi), which notice shall
state the purpose or purposes for which such meeting is being called and include any
supporting documentation relating to any action to be taken at such meeting.

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	 	(iv)	 	Special meetings of the Management Committee may be called by any Committee
Representative by notice given in accordance with the notice requirements set forth in
this Section 6.9, which notice shall state in reasonable detail the purpose or
purposes for which such meeting is being called; provided, that, the Committee
Representatives appointed by the Appointing Party that is not represented by the
Committee Representative calling such special meeting shall be entitled to in good
faith select a convenient location for the meeting and to suggest an alternative time
or times if the designated time is not convenient for them. Except as set forth in
Section 6.9(c)(vi), no action may be taken and no business may be transacted at such
special meeting which is not identified in such notice unless (A) such action or
business is incidental to the action or business for which the special meeting is
called or (B) such action or business does not materially adversely affect the
Parties, any of their respective Affiliates which are parties to any of the Master
Operative Documents or Flash Alliance. Minutes of each Management Committee meeting
shall be sent by facsimile to all Committee Representatives within ten (10) Business
Days after such meeting. Material to be presented at any Management Committee meeting
shall be sent by facsimile, electronic mail or delivered in hard copy to all Committee
Representatives together with the notice described in Section 6.9(c)(vi).
	 
	 	(v)	 	The actions taken by the Management Committee at any meeting, however called
and noticed, shall be as valid as though taken at a meeting duly held after regular
call and notice if (but not until), either before, at or after the meeting, any
Committee Representative as to whom such meeting was improperly held duly executes and
delivers a written waiver of notice or a written consent to the holding of such
meeting; provided, however, any Committee Representative who is present at a meeting
and does not protest the failure of notice shall be deemed to have received adequate
notice thereof. A vote of the Management Committee may be taken only either in a
meeting of the members thereof duly called and held or by the execution by the
Committee Representatives eligible to cast all the votes on the Management Committee
without a meeting of a consent setting forth the action so taken, and identified as a
consent of the Committee Representatives pursuant to this Section 6.9.
	 
	 	(vi)	 	Upon the consent of all Committee Representatives, a meeting of the
Management Committee may be held by conference telephone or similar communications
equipment by means of which all Committee Representatives participating in the meeting
can hear and be heard by all other participants, provided, that, such communications
equipment continues to be operational throughout the meeting. Any Committee
Representative may elect to participate in a meeting by conference telephone or
similar communications equipment upon sufficient advance notice to permit arrangements
therefor to be made. At any meeting, the

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

	6.10	 	[*]
	 
	(a)	 	[*]

	 	(i)	 	[*]
	 
	 	(ii)	 	[*]
	 
	 	(iii)	 	[*]
	 
	 	(iv)	 	[*]

	(b)	 	[*]

	 	(i)	 	[*]
	 
	 	(ii)	 	[*]
	 
	 	(iii)	 	[*]
	 
	 	(iv)	 	[*]
	 
	 	(v)	 	[*]
	 
	 	(vi)	 	[*]
	 
	 	(vii)	 	All members of the SanDisk Team will remain employees of SanDisk. Each
Party will indemnify the other Party and Flash Alliance from any

 

			
	*	 	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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	 	 	 	claim by any of such Party’s employees, consultants or agents (such Party being the
“Employer”) (A) based on other than willful misconduct of such Employer,
its employees, consultants or agents; or (B) that he or she has rights, or is owed
obligations, as an employee of the Party that is not the Employer.

	(c)	 	[*]
	 
	6.11	 	Non-solicitation of Employees. So long as the business of Flash Alliance
continues, each Party (and each of its respective Affiliates) shall not, without the prior
written consent of the other Party, directly recruit or solicit any employee or director of
Flash Alliance to leave his or her employment with Flash Alliance prior to the period ending
twenty-four (24) months after the FA Termination Date; provided, however, that placement of
employment advertisements or other general solicitation for employees not specifically
targeted to the employees or directors of Flash Alliance shall not constitute direct
recruitment. In the event of the dissolution and liquidation of Flash Alliance, either Party
(or any Affiliate of either Party) may solicit any former employee of such dissolved and
liquidated company, but neither Party (nor any of its Affiliates) shall be required to employ
any such Person. If all of the FA Shares held by one Party are purchased by the other Party
or its designee, if requested by the acquiring Party the Parties shall reach agreement on a
reasonable transition plan (without profit to the seller) in connection with the services
provided to Flash Alliance, as applicable, by employees and contractors of the selling Party.
	 
	6.12	 	Financing.
	 
	(a)	 	[*]
	 
	(b)	 	The Parties currently intend, but are not obligated, to structure the financing for
equipment purchases by Flash Alliance necessary to implement the Ramp-Up Plan as follows:

	 	(i)	 	Flash Alliance will enter into equipment lease or loan agreements and pledge
the financed equipment as collateral;
	 
	 	(ii)	 	Flash Alliance will secure external financing for approximately 50% of the
initial purchase price of its tools and each Party will provide equity capital
contributions and loans (on a subordinated basis) for the remaining cash requirements
of Flash Alliance necessary to execute the Ramp-Up Plan;

 

			
	*	 	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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	 	(iii)	 	each Party will severally and not jointly and through separate arrangements
guarantee as close as possible to 50% of Flash Alliance’s obligations under such lease
or loan agreements (any financing separately guaranteed or provided by Toshiba for
Flash Alliance or otherwise for investment in the Y4 Facility, “Toshiba
Financing”, any such financing separately guaranteed or provided by SanDisk for
Flash Alliance or otherwise for investment in the Y4 Facility “SanDisk
Financing” and the Toshiba Financing and SanDisk Financing, each a
“Financing”); and
	 
	 	(iv)	 	the Parties will attempt to obtain the foregoing financing from the same
financial institution, but under separate agreements that expressly disclaim any joint
and several liability of the Parties.

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

	 	(i)	 	[*]
	 
	 	(ii)	 	Unless otherwise expressly agreed by both Parties in writing in each case,
all Toshiba Financing and all SanDisk Financing shall create only several obligations
of the Parties and no joint and several obligations or liability. Toshiba (with
respect to Toshiba Financing) and SanDisk (with respect to SanDisk Financing) hereby
indemnifies and holds harmless the other Party and its Indemnified Parties from any
claims by any financial institution or other Person that the other Party has any
liabilities or obligations with respect to, respectively, any Toshiba Financing or
SanDisk Financing (unless joint liability has been agreed pursuant to the first
sentence of this Section 6.12(c)(ii)).
	 
	 	(iii)	 	Flash Alliance will use commercially reasonable efforts to comply with the
requirements of any financing sources. Flash Alliance will make available to each
Party one-half of its assets (with as near as practicable cost, collateral value and
type) to secure such Party’s Financing (whether external or loans from a Party or its
Affiliates).

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

 

			
	*	 	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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	 	(i)	 	the Non-Defaulting Party (A) shall have a claim against the Defaulting Party
for reimbursement of any payments made by the Non-Defaulting Party on the Defaulting
Party’s behalf (which will be subordinate to the lender’s claims and bear interest at
a rate 500 basis points in excess of the rate being charged by the lender to the
Defaulting Party) and (B) shall have the right, until and unless the Defaulting Party
pays in full the obligation to the Non-Defaulting Party under foregoing clause (A), to
take over the increment of production of the Y4 Facility represented by the collateral
with respect to which the lender took significant actions to enforce its rights; or
	 
	 	(ii)	 	the Non-Defaulting Party shall have the right to terminate the Operating
Agreement pursuant to Section 11.6 thereof (Foreclosure Default).

	6.13	 	Other Activities. Except as expressed in Section 6 and in the Common R&D
Agreement, neither Party nor any of their respective Affiliates shall: (i) fabricate NAND
Flash Memory Integrated Circuits at any location other than the Yokkaichi Facility or any
other fabrication facility agreed upon by the Parties in writing; (ii)have any third party
fabricate NAND Flash Memory Integrated Circuits; or (iii) have any right to fabricate NAND
Flash Memory Integrated Circuits beyond the capacity as limited pursuant to this Section 6, as
such capacity limitations may be amended from time to time in accordance with this Section 6.
For the avoidance of doubt, nothing contained in the foregoing shall restrict the Parties from
engaging in any other activities, including, without limitation, (A) designing any NAND Flash
Memory Product; (B) selling any NAND Flash Memory Product to any customer; (C) entering into
any equipment purchase or material supply agreements; or (D) entering into any patent
licensing arrangement; and nothing in the foregoing shall restrict Toshiba from installing any
manufacturing line in the Toshiba Foundry Facility subject to the capacity limitations set
forth in Section 6 of the FVC Japan Master Agreement and the FP Master Agreement and as
provided herein, as such capacity limitations may be amended from time to time in accordance
with this Section 6. For purposes of this Section 6.13, “NAND Flash Memory Integrated
Circuits” means ICs included in the definition of NAND Flash Memory Products pursuant to
Section 3.2.
	 
	6.14	 	Protection of Intellectual Property. Both Parties recognize that it is
important for the success of the Y4 NAND Flash Memory Products business to promote the
adoption of such Y4 NAND Flash Memory Products with a wide variety of customers and
applications, whether for card use or non-card use, and with such recognition, each Party
shall use reasonable efforts to protect and enhance the value of Y4 NAND Flash Memory
Products. Further, where feasible, each Party shall share with Flash Alliance internally
prepared analyses of competitive products prepared by either Party so as to allow Flash
Alliance to respond to such information and remain competitive in the marketplace; provided,
that neither Party warrants as to the accuracy or completeness of any such analysis so
provided.

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	6.15	 	[*]
	 
	7.	 	Other Agreements
	 
	 	 	To supplement their agreement as expressed in certain of the Master Operative Documents,
the Parties agree as set forth in this Section 7. To the extent of any conflict between
this Section 7 and any other Master Operative Document referenced in this Section 7, the
other Master Operative Document shall prevail.
	 
	7.1	 	Flash Alliance Management.
	 
	(a)	 	As contemplated by the FA Operating Agreement, the Y4 Operating Committee’s purpose
is to give both Parties the ability to influence the day to day operating decisions of Flash
Alliance and the Y4 Facility. The Y4 Operating Committee is intended to be a collaborative
body with real-time communications, respectful consultation and dispute resolution with the
goal of making the Y4 Facility the most competitive (cost and technology) memory fabrication
facility in the world.
	 
	(b)	 	If the Y4 Operating Committee is unable to decide an issue (by agreement of its two
members) such issue shall be referred to the Board of Directors. Special meetings of the
Board of Directors may be noticed for issues requiring urgent resolution. The Parties
contemplate that while a special meeting of the Board of Directors is being noticed, their
respective management teams will discuss any issue that the Y4 Operating Committee could not
resolve.
	 
	(c)	 	If the Board of Directors is unable to decide an issue (by unanimous agreement), such
issue shall be referred to the Management Committee for resolution, which shall be vested with
final decision making authority. This Agreement separately provides for procedures if the
Management Committee is unable to reach agreement on such issue.
	 
	7.2	 	Y4 Facility.
	 
	(a)	 	Building Construction and Facilitization. Toshiba has designed and is
constructing and facilitizing the Y4 Facility at its sole cost and expense, and SanDisk shall
work with Toshiba to help minimize administrative approval delays. Toshiba will exercise all
reasonable efforts to ensure that the construction of the Y4 Facility is completed by
[*], provided that Toshiba shall have no liability to SanDisk, any SanDisk
Affiliate or Flash Alliance if completion is not achieved by such time. The depreciation
charges for Y4 will be passed on to Flash Alliance as further described in Section 7.3(d).

 

			
	*	 	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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	(b)	 	With prior coordination with Toshiba and the construction contractors for the Y4
Facility, SanDisk will have reasonable access to the construction site for the Y4 Facility and
to all information pertaining to the construction of the Y4 Facility, on condition that
SanDisk will be solely responsible for all damage caused by such access.
	 
	(c)	 	Land. Neither SanDisk nor Flash Alliance will be charged for the land
Toshiba currently owns and makes available for the Y4 Facility. With respect to new land
(purchased or leased by Toshiba) required or related to the establishment of the Y4 Facility
and its operations, SanDisk will pay Toshiba on a quarterly basis during the term of this
Agreement a fair, reasonable and mutually-agreed fee to be calculated based on the amount
Toshiba actually pays or incurs for such new land and the number of parking spaces; provided,
however, that Toshiba will determine whether there will be a multi-level parking structure,
single level parking lot, or other method of providing parking for the Yokkaichi Facility,
and, provided further, that during the term of this Agreement SanDisk’s payments in respect of
land and parking costs will in no event exceed [*] per year.
	 
	(d)	 	Incentives. All government incentives (financial or otherwise) received with
respect to Flash Alliance, the Y4 Facility or Y4 operations will be shared equally by the
Parties.
	 
	7.3	 	FP Foundry Agreement. Flash Alliance and Toshiba shall enter into the FA
Foundry Agreement at the Closing. The FA Foundry Agreement provides for ordering procedures,
prices, delivery, cost reporting and other specific terms and conditions for the manufacture
by Toshiba and supply to Flash Alliance of Y4 NAND Flash Memory Products, which shall be
consistent with the following basic terms:
	 
	(a)	 	Facilities, Equipment and Raw Materials. The manufacturing facilities will
be located at the Y4 Facility and die sort will be located [*]or such other place
as the Parties may agree upon. Flash Alliance and Toshiba will enter into an exclusive lease
agreement with respect to the Y4 Facility and Flash Alliance’s manufacturing equipment located
in the Y4 Facility to be used in the manufacture of Y4 NAND Flash Memory Products by Toshiba.
Toshiba shall be responsible for obtaining the raw materials and services to be used in the
manufacture of Y4 NAND Flash Memory Products.
	 
	(b)	 	Production. Toshiba will manufacture Y4 NAND Flash Memory Products at the Y4
Facility for Flash Alliance ordered by Toshiba and SanDisk under the terms and conditions of
the FA Purchase and Supply Agreements. Flash Alliance and Toshiba (from the Yokkaichi
Facility) will use their best efforts to achieve the

 

			
	*	 	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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	 	 	Ramp-Up Plan manufacturing capacity (the “Y4 Facility Target Capacity”). Wafers
will be sorted between the Parties such that aggregate yield losses will be shared on an
equal basis.
	 
	(c)	 	Operating Relationship. The Parties shall provide personnel necessary for
the manufacturing of the Y4 NAND Flash Memory Products as described in Section 6.10.
	 
	(d)	 	Consideration to be Paid to Toshiba. Toshiba will be compensated by Flash
Alliance as provided in Section 4 of the FA Foundry Agreement, [*]
	 
	(e)	 	No Duplication of Costs or Expenses. It is the intent of the Parties that
any payments made by SanDisk under or pursuant to any Master Operative Documents, FVC Japan
Operative Documents or FP Operative Documents shall not be duplicative and SanDisk shall in no
event be required to pay or contribute more than once for any service, product or development
work provided under such agreements, if such service, product or development work is provided
under more than one agreement. In addition, if SanDisk makes a direct payment for any
service, product or development work provided under any such agreement, the cost incurred by
Toshiba (from the Yokkaichi Facility), FVC Japan, Flash Partners or Flash Alliance, as the
case may be, in connection with the provision of such service, product or development work
shall not be included in the applicable wafer price charged to SanDisk.
	 
	(f)	 	Exclusivity. The Yokkaichi Facility shall be Flash Alliance’s exclusive
manufacturing source for output of Y4 NAND Flash Memory Products. Flash Alliance may seek
external manufacturing sources for output in excess of the Yokkaichi Facility’s capacity upon
unanimous approval by the Management Committee.
	 
	7.4	 	FA Purchase and Supply Agreements. Flash Alliance and each of the Parties or
their respective Affiliates will enter into substantially identical FA Purchase and Supply
Agreements providing for specific terms and conditions for the purchase by the Parties of Y4
NAND Flash Memory Products from Flash Alliance, which shall be consistent with the following
basic terms:
	 
	(a)	 	Manufacturing. Flash Alliance shall manufacture or cause to be manufactured
Y4 NAND Flash Memory Products as contemplated by Section 7.3.
	 
	(b)	 	Purchase Commitment. Except as contemplated in Section 6.5(c)(ii), each
Party shall (itself or through Affiliates) purchase one half (based on a measure of equivalent
lots out per week with the equivalency being weighed based on the

 

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

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	 	 	process complexity factors (as calculated by a formula to be mutually determined by the
Parties) of the Y4 NAND Flash Memory Products) of the total L/M of Y4 NAND Flash Memory
Products. The foregoing purchase commitment of each Party shall not be subject to reduction
unless agreed in writing by the other Party, which may grant or withhold such approval in
its sole discretion.
	 
	(c)	 	Sales Price for Y4 NAND Flash Memory Products Purchased by the Parties. The
sales price charged by Flash Alliance to the Parties for wafers manufactured at Y4 shall be
the sum of:

	 	(i)	 	[*]
	 
	 	(ii)	 	[*]

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

	 	(i)	 	[*]
	 
	 	(ii)	 	[*]
	 
	 	(iii)	 	[*]
	 
	 	(iv)	 	[*]
	 
	 	(v)	 	[*]
	 
	 	(vi)	 	[*]

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

 

			
	*	 	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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	(b)	 	Production Control. Flash Alliance will provide [*] on a non-discriminatory
basis to SanDisk [*] with respect to [*], provided that the cost necessary
for making such system available or [*] will be borne by SanDisk. Each Party (through the Y4
Management Committee) will have the right to discuss the production schedule, planned wafer
starts and [*]
	 
	(c)	 	Operating Reports. SanDisk will have full access to any management or
operation reports related to Flash Alliance or Flash Alliance’s business through the Y4
Operating Committee (as defined in the FA Operating Agreement). Management and operating
reports related to Flash Alliance or Flash Alliance’s business as mutually agreed from time to
time will be simultaneously made available in Japanese and English to each Party. Upon
request, Toshiba employees will explain such reports to SanDisk’s employees and respond to
questions from SanDisk’s employees, but Toshiba will not be responsible for SanDisk’s failure
to understand such reports.
	 
	(d)	 	Insurance. Toshiba shall maintain or arrange property insurance covering
assets owned or leased by Flash Alliance and business interruption insurance in respect of the
business of Flash Alliance, the scope and amounts of which shall be consistent with Toshiba’s
practices at the Yokkaichi Facility and as required by any lender. This coverage shall
provide basically full replacement value of all Flash Alliance owned and leased equipment,
subject to valuation as part of Toshiba’s annual insurance policy renewal, and shall name
Flash Alliance as a beneficiary in respect of assets owned or leased by it and Flash
Alliance’s employee expenses covered by business interruption insurance. On an annual basis,
or when requested by either Party, the Y4 Operating Committee shall discuss and review the
current insurance coverage and/or the need for any additional property or business
interruption insurance in respect of Flash Alliance’s assets or business. Further, SanDisk
reserves the right to seek to arrange additional property or business interruption insurance
for its own account in respect of Flash Alliance’s assets or business. If SanDisk seeks such
additional property or business interruption insurance, Toshiba shall cooperate in good faith
to provide such information and access as is reasonably necessary for SanDisk to arrange such
insurance. If Toshiba makes a recovery from a third party (other than an insurer per the
above) in respect of both assets of Flash Alliance and other assets, then Toshiba shall
allocate to Flash Alliance a share of the net amount of such recovery in proportion to the
losses suffered by Flash Alliance and total losses suffered by Flash Alliance and Toshiba.

 

			
	*	 	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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	8.	 	Termination
	 
	8.1	 	Termination.
	 
	(a)	 	Termination of any Master Operative Document by either Party shall be done only in
good faith.
	 
	(b)	 	This Agreement shall be terminated automatically upon the earlier of the Transfer of
all of a Party’s FA Shares to the other Party (or its Affiliate) or upon completion of the
dissolution and liquidation of Flash Alliance pursuant to Section 11 (Dissolution) of the FA
Operating Agreement (the date of such Transfer or dissolution and liquidation, the “FA
Termination Date”).
	 
	(c)	 	Upon termination of this Agreement resulting from an event of dissolution of Flash
Alliance due to the expiration of Flash Alliance pursuant to Section 11.1(a) (Expiration) of
the FA Operating Agreement:

	 	(i)	 	the Parties shall further amend the Cross License Agreement, as then in
effect, to specify that each Party’s patents issued or issuing on patent applications
entitled to an effective filing date prior to the FA Termination Date are licensed on
a royalty-free basis for the duration of such patents. The scope of the licenses as
amended pursuant to this Section 8.1(c)(i) shall not be greater than the scope of
those granted under the Cross License Agreement, as in effect as of the FA Termination
Date.
	 
	 	(ii)	 	Toshiba shall grant to SanDisk, effective upon the FA Termination Date, a
non-exclusive, non-transferable (except to Affiliates of SanDisk), non-sub-licensable,
fully paid up, royalty-free license to make, have made, use, sell and have sold NAND
Flash Memory Products anywhere in the world utilizing the NAND technology transferred
to and/or utilized at the Yokkaichi Facility, and SanDisk shall have full access to
all such know-how at the Yokkaichi Facility which has been transferred to the
Yokkaichi Facility prior to the FA Termination Date.

	(d)	 	Upon a termination of this Agreement resulting from (i) an event of dissolution of
Flash Alliance or (ii) one Party’s acquisition of all of the other Party’s FA Shares (the
acquirer thereof referred to hereinafter as the “Acquiring Party” and the seller
thereof referred to hereinafter as the “Selling Party”) pursuant to Section 11.5
(Dissolution Upon Notice) of the FA Operating Agreement:

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

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	 	 	 	Alliance under this Agreement as of the FA Termination Date (the “Termination
Capacity”)) for a period of eighteen (18) months following the Termination Date
in the following ramp-down manner:

	 	(A)	 	During the first six months following the FA Termination Date: 100%
of the Termination Capacity
	 
	 	(B)	 	During the 7th through the 12th month following the FA Termination
Date: 75% of the Termination Capacity
	 
	 	(C)	 	During the 13th through the 18th month following the FA Termination
Date: 50% of the Termination Capacity.

	 	(ii)	 	Toshiba and SanDisk and their respective Affiliates shall have a perpetual,
fully paid-up, royalty-free right to use technology previously transferred to one
another during the term of this Agreement.
	 
	 	(iii)	 	The Parties shall further amend the Cross License Agreement to specify that
each Party’s patents issued or issuing on patent applications entitled to an effective
filing date prior to the FA Termination Date are licensed on a royalty free basis for
the duration of such patents. The scope of the licenses as amended pursuant to this
Section 8.1(d)(iii) shall not be greater than the scope of those granted under the
Cross License Agreement, as in effect as of FA Termination Date.
	 
	 	(iv)	 	Upon termination of this Agreement resulting from an event of dissolution of
Flash Alliance caused by Toshiba’s election to withdraw from Flash Alliance pursuant
to the FA Operating Agreement, Toshiba hereby grants to SanDisk, effective upon the FA
Termination Date, a non-exclusive, non-transferable (except to Affiliates of SanDisk),
non-sub-licensable, fully paid-up, royalty-free license to make, have made, use, sell
and have sold NAND Flash Memory Products anywhere in the world utilizing the NAND
technology transferred to and/or utilized at the Yokkaichi Facility, and SanDisk shall
have full access to all such know-how at the Yokkaichi Facility which has been
transferred to the Yokkaichi Facility prior to the FA Termination Date.

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

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

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	 	 	 	its capacity allocation available from Flash Alliance under this Agreement as of
the FA Termination Date (the “SanDisk Termination Capacity”):

	 	(A)	 	During the first six months following the FA Termination Date: 100%
of the SanDisk Termination Capacity
	 
	 	(B)	 	During the 7th through the 12th month following the FA Termination
Date: 75% of the SanDisk Termination Capacity
	 
	 	(C)	 	During the 13th through the 18th month following the FA Termination
Date: 50% of the SanDisk Termination Capacity.

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

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

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

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

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Execution Version

	 	(B)	 	During the 7th through the 12th month following the FA Termination
Date: 75% of the Termination Capacity
	 
	 	(C)	 	During the 13th through the 18th month following the FA Termination
Date: 50% of the Termination Capacity.

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

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

	 	(i)	 	The Parties shall further amend the Cross License Agreement to specify that,
with respect only to Y4 NAND Flash Memory Products and any other Licensed Products
defined in the Cross License Agreement and manufactured with 300mm wafers at any
facility, each Party’s patents issued or issuing on patent applications entitled to an
effective filing date prior to the FA Termination Date are licensed at the royalty
rates specified in Schedule 8.1(g) for seven (7) years after the FA
Termination Date or until the end of calendar 2021, whichever comes first, and
thereafter such licenses shall be on a royalty-free basis.
	 
	 	(ii)	 	In the event that Toshiba or an Affiliate of Toshiba is the Defaulting
Party, Toshiba shall grant to SanDisk, effective upon such date of termination, a
non-exclusive, non-transferable (except to Affiliates of SanDisk), non-sub-licensable,
fully paid-up, royalty-free license to make, have made, use, sell and have sold NAND
Flash Memory Products anywhere in the world

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EXHIBIT 10.1

FOIA Confidential Treatment Requested

Execution Version

	 	 	 	utilizing the NAND technology transferred to and/or utilized at the Yokkaichi
Facility, and SanDisk shall have full access to all such know-how at the Yokkaichi
Facility which has been transferred to the Yokkaichi Facility prior to the FA
Termination Date.

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

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

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

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

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EXHIBIT 10.1

FOIA Confidential Treatment Requested

Execution Version

	 	 	 	that, with respect only to Y4 NAND Flash Memory Products and any other Licensed
Products defined in the Cross License Agreement and manufactured with 300mm wafers
at any facility, SanDisk’s patents issued or issuing on patent applications
entitled to an effective filing date prior to the FA Termination Date are licensed
to Toshiba on a royalty-free basis.

	(j)	 	Restructuring Costs.

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

	 	(A)	 	[*]
	 
	 	(B)	 	[*]

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

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

	9.	 	Miscellaneous
	 
	9.1	 	Survival. Sections 1.3, 6.10(b)(vii), 6.11, 6.12(d), 8 and 9 and
Appendix A shall survive the termination or expiration of this Agreement.
	 
	9.2	 	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.

 

			
	*	 	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.

38

 

EXHIBIT 10.1

FOIA Confidential Treatment Requested

Execution Version

	9.3	 	Governing Law. This Agreement shall in all respects be governed by and
construed in accordance with the internal laws of the State of California applicable to
agreements made and to be performed entirely within such state without regard to the conflict
of laws principles of such state. Each Master Operative Document shall be governed in
accordance with its governing law provision and, in the absence of any such provision, by the
first sentence of this Section 9.3.
	 
	9.4	 	Assignment. Neither Party may transfer this Agreement or any of its rights
hereunder (except for any transfer to an Affiliate or in connection with a merger,
consolidation or sale of all or substantially all the assets or the outstanding securities of
such party, which transfer shall not require any consent of the other party) without the prior
written consent of the other Party (which consent may be withheld in such other Party’s sole
discretion), and any such purported transfer without such consent shall be void.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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EXHIBIT 10.1

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Execution Version

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

	 	 	 	 	 
	 	TOSHIBA CORPORATION

 	 
	 	By:  	
 	 
	 	Name:  	Masashi Muromachi 	 
	 	Title:  	President and CEO
Semiconductor Company
Corporate Executive Vice President 	 
	 

	 	 	 	 	 
	 	SANDISK CORPORATION

 	 
	 	By:  	
 	 
	 	Name:  	Eli Harari 	 
	 	Title:  	Chief Executive Officer 	 
	 

	 	 	 	 	 
	 	SANDISK (IRELAND) LIMITED

 	 
	 	By:  	
 	 
	 	Name:  	Sanjay Mehrotra 	 
	 	Title:  	Director 	 
	 

[Signature page to Flash Alliance Master Agreement]

 

 

EXHIBIT 10.1

FOIA Confidential Treatment Requested

Execution Version

APPENDICES

Appendix A — Definitions, Rules of Construction and General Terms and Conditions

	 	 	 	 	 
	EXHIBITS
	 
	 	 	 	 
	(Flash Alliance Documents)
	Exhibit A1

	 	-
	 	Share Purchase Agreement
	Exhibit A2

	 	-
	 	FA Operating Agreement
	Exhibit A3

	 	-
	 	FA Foundry Agreement
	Exhibit A4-1

	 	-
	 	SanDisk Purchase and Supply Agreement
	Exhibit A4-2

	 	-
	 	Toshiba Purchase and Supply Agreement
	Exhibit A5

	 	-
	 	FA Patent Indemnification Agreement
	Exhibit A6

	 	-
	 	Mutual Environmental Indemnification Agreement
	Exhibit A7

	 	-
	 	Lease Agreement
	Exhibit A8

	 	-
	 	Toshiba-SanDisk Ireland Services Agreement
	Exhibit A9

	 	-
	 	Toshiba-Flash Alliance Services Agreement
	Exhibit A10

	 	-
	 	SanDisk Ireland-Flash Alliance Services Agreement
	 
	 	 	 	 
	(Joint Operative Documents)
	Exhibit B1

	 	-
	 	Common R&D and Participation Agreement
	Exhibit B2

	 	-
	 	Product Development Agreement
	Exhibit B3

	 	-
	 	Amendment No. 4 to Cross License Agreement
	
SCHEDULES
	Schedule 4.5

	 	-
	 	Litigation; Decrees
	Schedule 4.7

	 	-
	 	Patents and Proprietary Rights
	Schedule 4.9

	 	-
	 	Cross License Payment Obligations
	Schedule 6.3

	 	-
	 	Technology Transfer Costs
	Schedule 6.5(b)

	 	-
	 	Ramp-Up Plan
	Schedule 8.1(e)

	 	-
	 	Royalty in case of SanDisk Unilateral Termination
	Schedule 8.1(f)

	 	-
	 	Royalty in case of Deadlock Termination
	Schedule 8.1(g)

	 	-
	 	Royalty in case of Event of Default Termination

Schs., p. 1

 

EXHIBIT 10.1

FOIA Confidential Treatment Requested

Execution Version

Schedule 4.5

Litigation, Decrees

[*]

 

			
	*	 	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.

Schs., p. 2

 

EXHIBIT 10.1

FOIA Confidential Treatment Requested

Execution Version

Schedule 4.7

Patents and Proprietary Rights

[*]

 

			
	*	 	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.

Schs., p. 3

 

EXHIBIT 10.1

FOIA Confidential Treatment Requested

Execution Version

Schedule 4.9

Cross License Payment Obligations

[*]

 

			
	*	 	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.

Schs., p. 4

 

EXHIBIT 10.1

FOIA Confidential Treatment Requested

Execution Version

Schedule 6.3

Technology Transfer Costs

[*]

 

			
	*	 	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.

Schs., p. 5

 

EXHIBIT 10.1

FOIA Confidential Treatment Requested

Execution Version

Schedule 6.5(b)

Ramp-Up Plan

[*]

 

			
	*	 	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.

Schs., p. 6

 

EXHIBIT 10.1

FOIA Confidential Treatment Requested

Execution Version

Schedule 8.1(e)

Royalty in case of SanDisk Unilateral Termination

[*]

 

			
	*	 	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 10.1

FOIA Confidential Treatment Requested

Execution Version

Schedule 8.1(f)

Royalty in case of Deadlock Termination

[*]

 

			
	*	 	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 10.1

FOIA Confidential Treatment Requested

Execution Version

Schedule 8.1(g)

Royalty in case of Event of Default Termination

[*]

 

			
	*	 	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.

 

Execution
Version

Exhibit 10.1

APPENDIX A

DEFINITIONS, RULES OF CONSTRUCTION AND

DOCUMENTARY CONVENTIONS

          The following shall apply unless otherwise required by the main body of the agreement into
which this Appendix A is being incorporated (as used herein, “this Agreement”):

Definitions

          The following terms shall have the specified meanings:

          “Accountants” means such firm of internationally recognized independent certified public
accountants for Flash Alliance as is appointed pursuant to the FA Operating Agreement from time to
time. Initially, the Accountants shall be Shin Nihon & Company, an affiliate of Ernst & Young LLP.

          “Affiliate” of any Person means any other Person which directly or indirectly controls, is
controlled by or is under common control with, such Person; provided, however, that the term
Affiliate, (a) when used in relation to Flash Alliance or any Subsidiary of Flash Alliance, shall
not include SanDisk Corporation or Toshiba or any Affiliate of either of them, and (b) when used in
relation to SanDisk Corporation or Toshiba or any Affiliate of either of them, shall not include
Flash Alliance or any Subsidiary of Flash Alliance.

          “Articles” means the Articles of Incorporation of Flash Alliance.

          “Bankruptcy Event” means, with respect to any Person, the occurrence or existence of any of the
following events or conditions: such Person (1) is dissolved; (2) becomes insolvent or fails or is
unable or admits in writing its inability generally to pay its debts as they become due; (3) makes
a general assignment, arrangement or composition with or for the benefit of its creditors; (4)
institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy
or any other relief under any bankruptcy or insolvency law or other similar law affecting
creditors’ rights, or a petition is presented for its winding up or liquidation and, in the case of
any such proceeding or petition instituted or presented against it, such proceeding or petition (A)
results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making
of an order for its winding up or liquidation or (B) is not dismissed, discharged, stayed or
restrained in each case within 60 days of the institution or presentation thereof; (5) has a
resolution passed by its governing body for its winding-up or liquidation; (6) seeks or becomes
subject to the appointment of an administrator, receiver, trustee, custodian or other similar
official for it or for all or substantially all its assets (regardless of how brief such
appointment may be, or whether any obligations are promptly assumed by another entity or whether
any other event described in this clause (6) has occurred and is continuing); (7) experiences any
event which, under the applicable laws of any jurisdiction, has an analogous effect to any of the
events specified in clauses (1) through (6) above; or (8) takes any action in

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Execution Version

furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing
acts.

          “Board of Directors” means the board of directors of Flash Alliance.

          “Burdensome Condition” means, with respect to any proposed transaction, any action taken, or
credibly threatened, by any Governmental Authority or (except if such action or threat is
frivolous) other Person to challenge the legality of such proposed transaction, including (i) the
pendency of a governmental investigation (formal or informal) in contemplation of the possible
actions described in clauses (ii)(A), (ii)(B) or (ii)(C) below, (ii) the institution of a suit or
the written threat thereof (A) seeking to restrain, enjoin or prohibit the consummation of such
transaction or material part thereof, to place any material condition or limitation upon such
consummation or to invalidate, suspend or require modification of any material provision of any
Operative Document, (B) challenging the acquisition by either Toshiba or SanDisk Ireland of its
Shares or (C) seeking to impose limitations on the ability of either Toshiba or SanDisk Ireland
effectively to exercise full rights as Shareholder of Flash Alliance, including the right to act on
all matters properly presented to the parties pursuant to the FA Operating Agreement, or (iii) an
order by a court of competent jurisdiction having any of the consequences described in (ii)(A),
(ii)(B) or (ii)(C) above, or placing any conditions or limitations upon such consummation that are
unreasonably burdensome in the reasonable judgment of the applicable Person.

          “Business Day” means any day (other than a day which is a Saturday, Sunday or legal holiday in
the State of California or Japan) on which commercial banks are open for business in the State of
California or Tokyo, Japan.

          “Business Plan” means the Initial Business Plan and each subsequent business plan, including
budgets and projections for Flash Alliance for each relevant period, approved in accordance with
Section 3.4(c) of the FA Operating Agreement and complying with Section 3.4(b) of the FA Operating
Agreement.

          “Capital Contribution” means the capital contribution made by or allocated to a Party by
virtue of its ownership of Shares, as indicated on Schedule 6.1 to the FA Operating
Agreement.

          “Change of Control” with respect to a Person means a transaction or series of related
transactions as a result of which (i) more than 50% of the beneficial ownership of the outstanding
common stock or other ownership interests of such Person (representing the right to vote for the
board of directors or similar organization of such Person) is acquired by another Person or
affiliated group of Persons, whether by reason of stock acquisition, merger, consolidation,
reorganization or otherwise or (ii) the sale or disposition of all or substantially all of a
Person’s assets to another Person or affiliated group of Persons.

          “Closing” means the closing of the transactions described in Sections 2.1 of the Master
Agreement.

          “Closing Date” means the date of the Closing.

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Execution Version

          “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor
statute. Any reference to a particular provision of the Code or a treasury regulation promulgated
pursuant to the Code means, where appropriate, the corresponding provision of any successor statute
or regulation.

          “Common R&D Agreement” means the Amended and Restated Common R&D and Participation Agreement,
dated as of the Effective Date, between Toshiba and SanDisk Corporation.

          “Companies Act” means the Companies Act (Kaisha-ho), Law No. 86 of July 26, 2005, as may be
amended hereafter and in effect as at any time.

          “Control” (including its correlative meanings “controlled by” and “under common control with”)
means possession, directly or indirectly, of power to direct or cause the direction of management
or policies (whether through ownership of securities or partnership or other ownership interests,
by contract or otherwise).

          “Cross License Agreement” has the meaning given in the Master Agreement.

          “Effective Date” means July 7, 2006.

          “Environmental Indemnification Agreement” means the Amended and Restated Mutual Contribution
and Environmental Indemnification Agreement, dated as of the Effective Date, between Toshiba and
SanDisk Corporation.

          “Event of Default” means, with respect to a Party, the occurrence or existence of any of the
following events or conditions which remains uncured for sixty (60) days following receipt by such
Party of written notice thereof:

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

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

          “FA Foundry Agreement” means the Foundry Agreement, dated as of the Effective Date, between
Flash Alliance and Yokkaichi.

          “FA Operating Agreement” means the Operating Agreement, dated as of the Effective Date,
between Toshiba and SanDisk Ireland.

          “FA Operative Documents” has the meaning given in the Master Agreement.

          “Fiscal Quarter” means, unless changed by the Board of Directors, a calendar quarter.

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Execution Version

          “Fiscal Year” means the one year period commencing on April 1 of each year.

          “Flash Alliance” means Flash Alliance, Ltd., a Japanese special limited liability company
(tokurei yugen kaisha).

          “Flash Partners” means Flash Partners, Ltd., a Japanese special limited liability company
(tokurei yugen kaisha).

          “FP Master Agreement” means the Master Agreement between Toshiba and SanDisk dated as of
September 10, 2004.

          “FP Operative Documents” means the Flash Partners Master Agreement dated as September 10,
2004, the Share Purchase Agreement between Toshiba and SanDisk Manufacturing, dated as of September
10, 2004, the Operating Agreement between Toshiba and SanDisk International, dated as of September
10, 2004, the Foundry Agreement between Flash Partners and Toshiba, dated as of September 10, 2004,
the Purchase and Supply Agreement between Flash Partners and SanDisk International, dated as of
September 10, 2004, the Purchase and Supply Agreement between Flash Partners and Toshiba, dated as
of September 10, 2004, the Patent Indemnification Agreement between SanDisk Corporation and
Toshiba, dated as of September 10, 2004, the Mutual Contribution and Environmental Indemnification
Agreement between SanDisk Corporation and Toshiba, dated as of September 10, 2004, and the Lease
Agreement between Flash Partners and Toshiba, as owner of the Yokkaichi Facility, dated as of
September 10, 2004.

          “FVC Japan” means FlashVision Ltd., a Japanese special limited liability company (tokurei
yugen kaisha).

          “FVC Japan Equipment” means any equipment which is or will, from time to time, be owned or
leased by FVC Japan.

          “FVC Japan Master Agreement” means the Master Agreement between Toshiba and SanDisk dated as
of April 10, 2002, as amended and restated as of the Effective Date.

          “FVC Japan Operative Documents” means the FVC Japan Master Agreement as amended to date, the
New Operating Agreement between the Parties, dated as of April 10, 2002, as amended to date, the
Foundry Agreement between FVC Japan and Toshiba, dated as of April 10, 2002, the SanDisk Foundry
Agreement between the Parties, dated as of April 10, 2002, the Purchase and Supply Agreement
between FVC Japan and SanDisk, dated as of April 10, 2002, the Purchase and Supply Agreement
between FVC Japan and Toshiba, dated as of April 10, 2002, and the Services Agreement between FVC
Japan and Toshiba dated as of April 1, 2002.

          “FVC Japan NAND Flash Memory Products” has the meaning given in Section 3.3 of the Master
Agreement.

          “Governmental Action” means any authorization, consent, approval, order, waiver, exception,
variance, franchise, permission, permit or license of, or any registration, filing or declaration
with, by or in respect of, any Governmental Authority.

3

 

Execution Version

          “Governmental Authority” means any United States or Japanese federal, state, local or other
political subdivision or foreign governmental Person, authority, agency, court, regulatory
commission or other governmental body, including the Internal Revenue Service and the Secretary of
State of any State.

          “Governmental Rule” means any statute, law, treaty, rule, code, ordinance, regulation,
license, permit, certificate or order of any Governmental Authority or any judgment, decree,
injunction, writ, order or like action of any court or other judicial or arbitration tribunal.

          “Indebtedness” of any Person means, without duplication:

     (a) all obligations (whether present or future, contingent or otherwise, as principal
or surety or otherwise) of such Person in respect of borrowed money or in respect of
deposits or advances of any kind;

     (b) all obligations of such Person evidenced by bonds, debentures, notes or similar
instruments;

     (c) all obligations of such Person upon which interest charges are customarily paid,
except for trade payables;

     (d) all obligations of such Person under conditional sale or other title retention
agreements relating to property or assets purchased by such Person;

     (e) all obligations of such Person issued or assumed as the deferred purchase price of
property or services (other than with respect to the purchase of personal property under
standard commercial terms);

     (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on property owned
or acquired by such Person, whether or not the obligations secured thereby have been
assumed;

     (g) all guarantees by such Person of Indebtedness of others;

     (h) all obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property (or a combination
thereof), which obligations would be required to be classified and accounted for as capital
leases on a balance sheet of such Person prepared in accordance with Japanese GAAP or US
GAAP, as applicable;

     (i) all obligations of such Person (whether absolute or contingent) in respect of
interest rate swap or protection agreements, foreign currency exchange agreements or other
interest or exchange rate hedging arrangements; and

     (j) all obligations of such Person as an account party in respect of letters of credit
and bankers’ acceptances.

4

 

Execution Version

          The Indebtedness of any Person shall include the Indebtedness of any partnership in which such
Person is a general partner.

          “Indemnified Parties” means the Party being indemnified’s officers, directors, employees,
agents, contractors, subcontractors, and transferees permitted pursuant to the FA Operating
Agreement and the Master Agreement.

          “Japanese GAAP” means generally accepted accounting principles in Japan as in effect from time
to time, consistently applied.

          “Japanese GAAS” means generally accepted auditing standards in Japan as in effect from time to
time.

          “License Agreement” means the Patent Cross License Agreement dated July 30, 1997 by and
between Toshiba and SanDisk, [*]

          “Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge,
encumbrance, charge or security interest in or on such asset, (b) the interest of a vendor or a
lessor under any conditional sale agreement, capital lease or title retention agreement relating to
such asset and (c) in the case of securities, any purchase option, call or similar right with
respect to such securities.

          “L/M” means lots per month.

          “Management Committee” has the meaning given in the Master Agreement.

          “Master Agreement” means the Flash Alliance Master Agreement, dated as of the Effective Date,
by and among Toshiba, SanDisk and SanDisk Ireland.

          “Material” means, with respect to any Person, an event, change or effect which is or, insofar
as reasonably can be foreseen, will be material to the condition (financial or otherwise),
properties, assets, liabilities, capitalization, licenses, businesses, operations or prospects of
such Person and, in the case of Flash Alliance, the ability of Flash Alliance to carry out its
then-current Business Plan.

          “NAND Flash Memory Products” has the meaning given in Section 3.2 of the Master Agreement.

          “Net Book Value” means, with respect to any Person, the total assets of such Person less the
total liabilities of such Person, in each case as determined in accordance with Japanese GAAP or US
GAAP, as applicable.

          “Patent Indemnification Agreement” means the Patent Indemnification Agreement dated as of the
Effective Date between Toshiba and SanDisk Corporation.

 

			
	*	 	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

 

Execution Version

          “Percentage” means, with respect to any Shareholder (as defined in the FA Operating
Agreement), the percentage of such Shareholders’ ownership interest in Flash Alliance. For the
avoidance of doubt, as of the date hereof, Percentage means with respect to Toshiba or its
Affiliate, 50.1%, and with respect to SanDisk Ireland or its Affiliate, 49.9%; provided, however,
if either Shareholder transfers all of its Shares to any Affiliate in accordance with the FA
Operating Agreement, its Percentage shall be 0% and such Affiliate transferee shall receive the
entire Percentage of the transferring Shareholder.

          “Permitted Liens” means (a) the rights and interests of Flash Alliance, either Party or any
Affiliate of any such Person as provided in the FA Operative Documents, and (b) Liens for Taxes
which are not due and payable or which may after contest be paid without penalty or which are being
contested in good faith and by appropriate proceedings and so long as such proceedings shall not
involve any substantial risk of the sale, forfeiture or loss of any part of any relevant asset or
title thereto or any interest therein.

          “Person” means any individual, firm, company, corporation, limited liability company,
unincorporated association, partnership, trust, joint venture, Governmental Authority or other
entity, and shall include any successor (by merger or otherwise) of such entity.

          “Product Development Agreement” means the Amended and Restated Product Development Agreement,
dated as of the Effective Date, between Toshiba and SanDisk Corporation.

          “SanDisk Corporation” means SanDisk Corporation, a Delaware corporation.

          “SanDisk Ireland” means SanDisk (Ireland) Limited, a company organized under the laws of the
Republic of Ireland.

          “SanDisk International” means SanDisk (Cayman) Limited, a company organized under the laws of
the Cayman Islands.

          “SanDisk Manufacturing” means SanDisk Manufacturing Limited, a company organized under the
laws of the Republic of Ireland.

          “SanDisk Purchase and Supply Agreement” means the Purchase and Supply Agreement, dated as of
the Effective Date, between SanDisk Ireland and Flash Alliance.

          “Shareholder” means the holder of any Shares.

          “Shares” means the issued and outstanding shares (kabushiki) in Flash Alliance.

          “Subsidiary” of any Person means any other Person:

     (i) more than 50% of whose outstanding shares or securities (representing the right to
vote for the election of directors or other managing authority) are, or

     (ii) which does not have outstanding shares or securities (as may be the case in a
partnership, joint venture or unincorporated association), but more than 50% of

6

 

Execution Version

whose ownership interest representing the right to make decisions (equivalent to those
generally reserved for the board of directors of a corporation) for such other Person is,

now or hereafter owned or controlled, directly or indirectly, by such Person, but such other Person
shall be deemed to be a Subsidiary only so long as such ownership or control exists; provided,
however, that the term Subsidiary as used in any FA Operative Document, when used in relation to a
Party or any of its Affiliates, shall not include Flash Alliance or any of its Subsidiaries.

          “Tax” or “Taxes” means all United States or Japanese Federal, state, local or other political
subdivision and foreign taxes, assessments and other governmental charges, including: (a) taxes
based upon or measured by gross receipts, income, profits, sales, use or occupation and (b) value
added, ad valorem, transfer, franchise, withholding, payroll, employment, excise or property taxes,
together with (c) all interest, penalties and additions imposed with respect to such amounts and
(d) any obligations under any agreements or arrangements with any other Person with respect to such
amounts.

          “Toshiba” means Toshiba Corporation, a Japanese corporation.

          “Toshiba Foundry Facility” means the Yokkaichi Facility, excluding the Y3 and Y4 Facility and
the FVC Japan Equipment but including Toshiba’s Asahi facility and Toshiba’s Oita facility.

          “Toshiba Foundry NAND Flash Memory Products” means NAND Flash Memory Products manufactured at
a Toshiba Foundry Facility.

          “Toshiba-SanDisk Ireland Services Agreement” means the Services Agreement, dated as of the
Effective Date, between SanDisk Ireland and Toshiba.

          “Toshiba Purchase and Supply Agreement” means the Purchase and Supply Agreement, dated as of
the Effective Date, between Toshiba and Flash Alliance.

          “Transfer” means any transfer, sale, assignment, conveyance, creation of any Lien (other than
a Permitted Lien), or other disposal or delivery, including by dividend or distribution, whether
made directly or indirectly, voluntarily or involuntarily, absolutely or conditionally, or by
operation of law or otherwise.

          “Unique Activities” means production activities of Flash Alliance at the request of either
Shareholder to (i) implement changes in the manufacturing processes to be employed for Products to
be manufactured for such Shareholder (or its Affiliates) that are not agreed to by the other
Shareholder, (ii) commence manufacturing other Products for the requesting Shareholder (or its
Affiliates) that the other Shareholder does not desire to have manufactured for it and which
require a change in manufacturing processes or in the utilization of the Facility or production
resources, or (iii) implement any other change in its operations in order to manufacture Products
specifically for the requesting Shareholder (or its Affiliates).

          “US GAAP” means generally accepted accounting principles in the United States as in effect
from time to time, consistently applied.

7

 

Execution Version

          “US GAAS” means generally accepted auditing standards in the United States as in effect from
time to time.

          “Y3 Facility” means the facility at which Y3 NAND Flash Memory Products are manufactured for
Flash Partners.

          “Y4 Facility” has the meaning given in the Master Agreement.

          “Y4 NAND Flash Memory Products” has the meaning given in Section 3.3 of the Master Agreement.

          “Yokkaichi Facility” means Toshiba’s facilities in Yokkaichi Japan, including the FVC Japan
Equipment, the Y3 Facility, the Y4 Facility and Toshiba’s Asahi facility.

Rules of Construction and Documentary Conventions

2.1 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.

2.2 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 the FA Operative Documents, considered as a single transaction, cannot be preserved,
the FA Operative Documents shall either be renegotiated or terminated by mutual agreement of the
Parties.

2.3 Assignment. Except as may otherwise be specifically provided in this
Agreement, no party hereto shall 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 parties) 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.

8

 

Execution Version

2.4 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 the Master Agreement
and in Section 2.5 of this Appendix A until the parties have attempted to resolve the
subject dispute by following said dispute resolution process to its conclusion.

(c) If the due date for any amount required to be paid under this Agreement is not a
Business Day, such amount shall be payable on the next succeeding Business Day; provided that if
payment cannot be made due to the existence of a banking crisis or international payment embargo,
such amount may be paid within the following 30 days. If due to the occurrence of an act of God,
any party is prevented from providing training, technical assistance or other similar support
required to be provided to Flash Alliance pursuant to this Agreement, such party shall have an
additional 30 day period to make alternative arrangements to provide such support.

2.5 Arbitration. Any dispute concerning this Agreement shall be referred to the
Management Committee and handled by it in accordance with the Master Agreement. If the Management
Committee cannot resolve such dispute in accordance with the terms of the Master 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 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.

2.6 Damages Limited. IN THE ABSENCE OF ACTUAL FRAUD, IN NO EVENT SHALL ANY PARTY
BE LIABLE TO OR BE REQUIRED TO INDEMNIFY ANY OTHER PARTY OR ANY OF THEIR RESPECTIVE AFFILIATES FOR
ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL OR INDIRECT DAMAGE OF ANY KIND, (INCLUDING WITHOUT
LIMITATION LOSS OF PROFIT OR DATA), WHETHER OR NOT ADVISED OF THE POSSIBILITY OF SUCH LOSS.

2.7 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.

9

 

Execution Version

2.8 Table of Contents; Headings. The Table of Contents and 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.

2.9 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.

2.10 Entire Agreement. This Agreement, together with each other FA Operative
Documents and the Exhibits, Schedules, Appendices and Attachments hereto and thereto, when
completed, constitute the agreement of the parties to the FA Operative Documents with respect to
the subject matter thereof and supersede all prior written and oral agreements and understandings
with respect to such subject matter.

2.11 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 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. Any reference to a FA Operative
Document shall include such FA Operative Document as amended or supplemented from time to time in
accordance with the provisions thereof.

2.12 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.

2.13 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 facsimile (if confirmed within two 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):

10

 

Execution Version

(a) If to SanDisk or SanDisk Ireland:

SanDisk Corporation

601 McCarthy Boulevard

Milpitas, CA 95035 USA

Telephone: (408) 542-0555

Facsimile: (408) 542-0600

Attention: President and CEO

With a copy to:

SanDisk Corporation

601 McCarthy Boulevard

Milpitas, CA 95035 USA

Telephone: (408) 548-0208

Facsimile: (408) 548-0385

Attention: Vice President and General Counsel

(b) If to Toshiba:

Toshiba Corporation

Semiconductor Company

1-1 Shibaura 1-Chome

Minato-Ku, Tokyo 105-8001 Japan

Telephone: 011 81 3 3457 3362

Facsimile: 011 81 3 5444 9339

Attention: Vice President

With a copy to:

Toshiba Corporation

Semiconductor Company

Legal Affairs Division

1-1 Shibaura 1-Chome

Minato-Ku, Tokyo 105-8001 Japan

Telephone: 011-81-3-3457-3452

Facsimile: 011-81-3-5444-9342

Attention: General Manager

(c) If to Flash Alliance:

Flash Alliance, Ltd.

800 Yamanoisshikicho,

Yokkaichi, Mie, Japan

Attention: President

11

 

Execution Version

With a copy to:

SanDisk Corporation

601 McCarthy Boulevard

Milpitas, CA 95035 USA

Telephone: (408) 542-0510

Facsimile: (408) 542-0640

Attention: Chief Operating Officer

And

Toshiba Corporation

Semiconductor Company

Legal Affairs Division

1-1 Shibaura 1-Chome

Minato-Ku, Tokyo 105-8001 Japan

Telephone: 011-81-3-3457-3452

Facsimile: 011-81-3-5444-9342

Attention: General Manager

2.14 Non Disclosure Obligations. Each party hereto agrees as follows:

(a) 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.

(b) For a period of [*] from the date of receipt of the Confidential
Information disclosed by one Party (the “Disclosing Party”) hereunder, the receiving Party
(the “Receiving Party”) agrees to safeguard the Confidential Information and to keep it in
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, except that the Receiving
Party shall not be obligated hereunder in any respect to information which:

	 	(i)	 	is already known to the Receiving Party at the time of its receipt from the
Disclosing Party as reasonably evidenced by its written records; or
	 
	 	(ii)	 	is or becomes publicly available without breach of this Agreement by the
Receiving Party; or
	 
	 	(iii)	 	is made available to a third party by the Disclosing Party without
restriction on disclosure; or

 

			
	*	 	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

 

Execution Version

	 	(iv)	 	is rightfully received by the Receiving Party from a third party without
restriction and without breach of this Agreement; or
	 
	 	(v)	 	is independently developed by the Receiving Party as reasonably evidenced by
its written records contemporaneous with such development; or
	 
	 	(vi)	 	is disclosed with the prior written consent of the Disclosing Party, provided
that each recipient from the Receiving Party shall execute a confidentiality agreement
prohibiting further disclosure of the Confidential Information, under terms no less
restrictive that those provided in this Agreement; or
	 
	 	(vii)	 	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
	 
	 	(viii)	 	is required to be disclosed by applicable securities of other laws or
regulations, provided that SanDisk shall, prior to any such disclosure required by the
U.S. Securities and Exchange Commission, provide Toshiba with notice which includes a
copy of the proposed disclosure. Further, SanDisk shall consider Toshiba’s timely input
with respect to the disclosure.

(c) Receiving Party shall use its reasonable best efforts to limit dissemination of the
Disclosing Party’s Confidential Information to such of its employees who have a need to know such
information for the purpose for which such information was disclosed to it. 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.

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

(e) All Confidential Information disclosed hereunder shall remain the property of the
Disclosing Party. Upon request by the Disclosing Party, the Receiving Party shall return all
Confidential Information, including any and all copies thereof, or certify in writing that all such
Confidential Information had been destroyed.

	 	 	 
	2.15	 	Definitions. The definitions set forth in Article I of this Appendix
A shall apply to this Article II.

13exv10w2

 

EXHIBIT 10.2

FOIA Confidential Treatment Requested

EXECUTION VERSION

	 	 	 
	 

	 	 
	 

OPERATING AGREEMENT OF FLASH ALLIANCE, LTD.

Dated as of July 7, 2006

between

TOSHIBA CORPORATION

and

SANDISK (IRELAND) LIMITED

	 	 	 
	 

	 	 
	 

 

 

Table of Contents

	 	 	 	 	 
	 	 	Page
	1. DEFINITIONS, RULES OF CONSTRUCTION AND DOCUMENTARY CONVENTIONS
	 	 	1	 
	 
	 	 	 	 
	1.1 Certain Definitions
	 	 	1	 
	1.2 Additional Definitions
	 	 	1	 
	1.3 Rules of Construction and Documentary Conventions
	 	 	2	 
	 
	 	 	 	 
	2. GENERAL PROVISIONS
	 	 	2	 
	 
	 	 	 	 
	2.1 Ownership of Shares; Capital Increase
	 	 	2	 
	2.2 Name
	 	 	3	 
	2.3 Principal Office
	 	 	3	 
	2.4 Term; Extension
	 	 	3	 
	2.5 Scope of Activity
	 	 	3	 
	2.6 Powers
	 	 	3	 
	2.7 Articles of Incorporation
	 	 	3	 
	2.8 Company Actions
	 	 	3	 
	 
	3. BUSINESS OPERATIONS
	 	 	3	 
	 
	 	 	 	 
	3.1 Business Dealings with the Company
	 	 	3	 
	3.2 Other Activities
	 	 	4	 
	3.3 Personnel
	 	 	4	 
	3.4 Business Plans and Related Matters
	 	 	6	 
	3.5 Standard of Care
	 	 	7	 
	3.6 Use of Names
	 	 	7	 
	 
	 	 	 	 
	4. ACTIONS BY THE SHAREHOLDERS
	 	 	7	 
	 
	 	 	 	 
	4.1 Matters Requiring the Approval of the Shareholders
	 	 	8	 
	4.2 General Meetings of Shareholders
	 	 	10	 
	4.3 Restrictions on Shareholders
	 	 	10	 
	 
	 	 	 	 
	5. MANAGEMENT AND OPERATIONS OF COMPANY
	 	 	11	 
	 
	 	 	 	 
	5.1 Meetings of the Directors
	 	 	11	 
	5.2 Officers; Employees
	 	 	16	 
	5.3 Y4 Representatives; Y4 Operating Committee
	 	 	16	 
	5.4 Insurance
	 	 	17	 
	5.5 Records
	 	 	17	 
	 
	 	 	 	 
	6. CAPITAL CONTRIBUTIONS; DISTRIBUTIONS
	 	 	18	 
	 
	 	 	 	 
	6.1 Capital Contributions
	 	 	18	 
	6.2 Distributions
	 	 	18	 
	6.3 No Interest
	 	 	19	 
	6.4 Return of Capital Contributions
	 	 	19	 

 

 

Table of Contents

	 	 	 	 	 
	 	 	Page
	7. ADDITIONAL CONTRIBUTIONS
	 	 	19	 
	 
	 	 	 	 
	8. ACCOUNTING AND TAXATION
	 	 	19	 
	 
	 	 	 	 
	8.1 Financial Accounting Conventions
	 	 	19	 
	8.2 Maintenance of Books of Account
	 	 	20	 
	8.3 Financial Statements
	 	 	20	 
	8.4 Other Reports and Inspection
	 	 	22	 
	8.5 Characterization
	 	 	22	 
	8.6 Deposit of Funds
	 	 	22	 
	 
	 	 	 	 
	9. SHARES OF CONTRIBUTION; DISPOSITION OF SHARES
	 	 	22	 
	 
	 	 	 	 
	9.1 Restrictions on Transfer of Shares
	 	 	22	 
	9.2 Admission of New Shareholders
	 	 	24	 
	9.3 Withdrawal Prohibited
	 	 	24	 
	9.4 Purchase of Additional Interest
	 	 	24	 
	 
	 	 	 	 
	10. CERTAIN AGREEMENTS OF THE SHAREHOLDERS
	 	 	25	 
	 
	 	 	 	 
	10.1 Taxes and Charges; Governmental Rules
	 	 	25	 
	10.2 Further Assurances
	 	 	25	 
	10.3 Dispute Resolution; Deadlock
	 	 	25	 
	10.4 Remedies Upon Event of Default; Termination on Breach
	 	 	27	 
	10.5 Mechanics of Sale
	 	 	27	 
	 
	 	 	 	 
	11. DISSOLUTION
	 	 	28	 
	 
	 	 	 	 
	11.1 Events of Dissolution
	 	 	28	 
	11.2 Dissolution by Agreement
	 	 	28	 
	11.3 Dissolution Upon Event of Default
	 	 	28	 
	11.4 Dissolution by Unilateral Option
	 	 	29	 
	11.5 Dissolution upon Notice
	 	 	29	 
	11.6 Financing Defaults
	 	 	29	 
	11.7 Winding Up
	 	 	30	 
	11.8 Liquidation Proceeds
	 	 	30	 
	 
	 	 	 	 
	12. INDEMNIFICATION AND INSURANCE
	 	 	30	 
	 
	 	 	 	 
	12.1 Indemnification
	 	 	30	 
	12.2 Insurance
	 	 	31	 
	12.3 Indemnification by the Shareholders
	 	 	31	 
	12.4 Assertion of Claims
	 	 	32	 
	 
	 	 	 	 
	13. MISCELLANEOUS
	 	 	32	 
	 
	 	 	 	 
	13.1 Governing Law
	 	 	32	 
	13.2 Effectiveness
	 	 	32	 

 

 

Table of Contents
(continued)

	 	 	 	 	 
	EXHIBITS
	 	 	 	 
	 
	 	 	 	 
	Exhibit A

	 	-
	 	Articles of Incorporation of the Company
	 
	 	 	 	 
	SCHEDULES
	 	 	 	 
	 
	 	 	 	 
	Schedule 2.1(b)

	 	-
	 	Committed Additional Capital Contributions
	Schedule 5.3

	 	-
	 	Management and Operating Reports
	Schedule 6.1

	 	-
	 	Capital Contributions
	Schedule 8.3

	 	-
	 	Monthly Reports

 

 

EXECUTION VERSION

          OPERATING AGREEMENT of FLASH ALLIANCE, LTD., a Japanese limited liability company (tokurei
yugen kaisha), dated as of July 7, 2006, between TOSHIBA CORPORATION, a Japanese corporation
(“Toshiba”), and SANDISK (IRELAND) LIMITED, a company organized under the laws of the
Republic of Ireland (“SanDisk”).

          WHEREAS, Flash Alliance, Ltd. (the “Company”) is a Japanese limited liability company
(tokurei yugen kaisha);

          WHEREAS, pursuant to that certain Share Purchase Agreement, dated as of the date hereof, by
and between SanDisk and Toshiba, concurrently with the execution hereof, SanDisk has acquired from
Toshiba 1,497 shares in the Company (“Shares”), representing 49.9% of all issued and
outstanding Shares;

          WHEREAS, Toshiba holds the remaining 1,503 Shares, representing 50.1% of all issued and
outstanding Shares; and

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

          Accordingly, Toshiba and SanDisk agree as follows:

	1.	 	Definitions, Rules of Construction and Documentary Conventions 
	 
	1.1	 	Certain Definitions.
	 
	(a)	 	Capitalized terms used but not defined in the main body of this Agreement shall have the
respective meanings assigned to them in that certain Flash Alliance Master Agreement, dated as
of the date hereof, among SanDisk, SanDisk Corporation and Toshiba (the “Master
Agreement”) or in Appendix A to the Master Agreement.
	 
	(b)	 	As used herein, the term “Agreement” means this Operating Agreement together with any
Exhibits, Schedules, Appendices and Attachments hereto.
	 
	1.2	 	Additional Definitions. The following capitalized terms used in this Agreement shall
have the respective meanings assigned in the sections indicated below:

1

 

EXECUTION VERSION

	 	 	 
	Term	 	Defined in
	“Appendix A”

	 	Recitals
	“Articles”

	 	Recitals
	“Bankruptcy Event”

	 	Section 11.1(f)
	“Claim”

	 	Section 12.4(a)
	“Company”

	 	Recitals
	“Deadlock”

	 	Section 10.3(c)
	“Deadlock Dissolution Notice”

	 	Section 10.3(e)
	“Defaulting Shareholder”

	 	Section 10.4
	“Designated Individuals”

	 	Section 10.3(b)
	“Director(s)”

	 	Section 3.5(a)
	“Executive Vice President”

	 	Section 5.2(a)
	“General Meeting of Shareholders”

	 	Section 4.1(b)
	“Indemnified Party”

	 	Section 12.4(a)
	“Indemnifying Party”

	 	Section 12.4(a)
	“Initiating Shareholder”

	 	Section 10.3(e)
	“Losses”

	 	Section 12.1(a)
	“Master Agreement”

	 	Section 1.1(a)
	“Nondefaulting Shareholder”

	 	Section 10.4
	“Notified Party”

	 	Section 11.5
	“Notifying Party”

	 	Section 11.5
	“Permissible Assignee”

	 	Section 9.1(c)
	“Permissible Assignment Agreement”

	 	Section 9.1(c)
	“President”

	 	Section 5.2(a)
	“Responding Shareholder”

	 	Section 10.3(e)
	“SanDisk Representative”

	 	Section 5.3(a)
	“Shares”

	 	Recitals
	“Shareholder”

	 	Recitals
	“Termination Date”

	 	Section 11.4
	“Toshiba Representative”

	 	Section 5.3(a)
	“Y4 Operating Committee”

	 	Section 5.3(a)

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

2

 

EXECUTION VERSION

	2.	 	General Provisions 
	 
	2.1	 	Ownership of Shares; Capital Increase.
	 
	(a)	 	The rights and obligations of the Shareholders shall be as set forth herein, subject to the
Articles and mandatory provisions of the Companies Act.
	 
	(b)	 	The Shareholders shall effect the capital increases in the amounts and at the times
stipulated in Schedule 2.1(b).
	 
	2.2	 	Name. The name of the Company is “Flash Alliance Yugen Kaisha,” which translates to
“Flash Alliance, Ltd.” in English, and all Company business shall be conducted in that name or
such other name as the Shareholders shall mutually agree.
	 
	2.3	 	Principal Office. The principal office of the Company shall be located in Yokkaichi,
Mie, or such other place as the Shareholders shall mutually agree.
	 
	2.4	 	Term; Extension. The Company shall be terminated on December 31, 2021, unless
extended by mutual written agreement of all of the Shareholders or earlier terminated in
accordance with Section 11 (Dissolution). Any such extension shall be effective only upon the
written agreement of all of the Shareholders and shall be on such terms and for such period as
set forth in such agreement. The Shareholders agree to meet, no later than December 31, 2020,
to discuss the possible extension of the term of the Company.
	 
	2.5	 	Scope of Activity. The scope of activity of the Company shall be as set forth in
Section 3.1 (Purpose) and 6.7 (Capacity Sharing Arrangement) of the Master Agreement.
	 
	2.6	 	Powers. The Company shall have all the powers now or hereafter conferred by
applicable law on limited liability companies formed under the Companies Act and may do any
and all acts and things necessary, incidental or convenient to the purpose specified in
Section 2.5 (Scope of Activity).
	 
	2.7	 	Articles of Incorporation. On the date hereof and immediately following the execution
of this Agreement, the Shareholders shall hold a general meeting of the Shareholders and,
among other matters agreed between them, vote their Shares to amend the Articles so that they
will be in the form of Exhibit A. In the event of any conflict between this Agreement
and the Articles, the Shareholders confirm their intent that the terms of this Agreement shall
prevail, and on the request of either Shareholder, the Shareholders shall amend the Articles
to conform with this Agreement to the extent legally possible; provided that the inability to
implement such amendment shall not relieve any Shareholder from liability for any breach of
its obligations hereunder.
	 
	2.8	 	Company Actions. The Shareholders hereby authorize the Company, and ratify
(including for purposes of Section 4.1 (Matters Requiring the Approval of the Shareholders))
all action having been taken by or on behalf of the Company (including by its Shareholders and
Directors) prior to the date hereof, to execute and deliver the FA

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EXECUTION VERSION

	 	 	Operative Documents to which it is a party, including all certificates, agreements and other
documents required in connection therewith.
	 
	3.	 	Business Operations 
	 
	3.1	 	Business Dealings with the Company. Subject to Sections 4.1(a) (Matters Requiring
the Approval of the Shareholders) and 5.1(d) (Matters Requiring the Approval of the Board of
Directors), the Company may enter into contracts or agreements, or otherwise enter into
transactions or dealings, with any Shareholder or any of their respective Affiliates, and
derive and retain profits therefrom. The validity of any such contract, agreement,
transaction or dealing or any payment or profit related thereto or derived therefrom shall not
be affected by any relationship between the Company and any Shareholder or any of their
respective Affiliates, subject to the Companies Act. The Shareholders agree that where
practicable and contractually allowable (based on competitive price, availability and other
material terms), the Board of Directors will consider whether to utilize any Shareholder or
any of their respective Affiliates as the preferred providers of products and services that
may be required in the manufacturing operations of the Company, subject to the ability of such
Shareholder or Affiliate to meet the Company’s manufacturing requirements on competitive
terms. Unless otherwise approved by the Shareholders or otherwise expressly provided in the
FA Operative Documents, all business dealings of the Company with any Shareholder or any of
their respective Affiliates shall be on the most beneficial standard commercial terms and
conditions, including volume, price and credit terms, currently offered or made available to
unaffiliated customers by such Shareholder or Affiliate, as the case may be, with respect to
the products and services to be offered and provided to the Company.
	 
	3.2	 	Other Activities. The provisions of Section 6.13 (Other Activities) of the Master
Agreement are hereby incorporated herein by reference.
	 
	3.3	 	Personnel. The provisions of Section 6.10 (FA Management Structure and Headcount) of
the Master Agreement are hereby incorporated herein by reference.
	 
	3.4	 	Business Plans and Related Matters.
	 
	(a)	 	Initial and Subsequent Business Plans. The initial Business Plan of the Company,
setting forth the Company’s products, pricing, operating budget, capital expenditures, expense
budgets, financing plans and other business activities of the Company through the
[*], will be agreed upon and certified by the Board of Directors as soon as
practicable after the Closing.

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

 

			
	*	 	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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EXECUTION VERSION

	 	(ii)	 	An updated Business Plan complying with Section 3.4(b) (Form and Scope) in
respect of each successive Fiscal Year after the [*] shall be prepared under the
direction of the Chief Executive Officer of the Company and submitted to the Board of
Directors for review and approval not later than the [*] preceding the commencement of
such Fiscal Year.
	 
	 	(iii)	 	When the proposed Business Plan in respect of a Fiscal Year is approved by the
Board of Directors, it shall constitute the Business Plan of the Company for such
Fiscal Year and the Company and its directors and employees shall implement such
Business Plan, which shall be the basis of the Company’s operations for such Fiscal
Year. Upon approval, the approved Business Plan shall constitute the approved
operational, financing and capital expenditure budget. The Board of Directors shall
have the authority pursuant to Section 5.1(d) (Matters Requiring the Approval of the
Board of Directors) to amend the most recently approved Business Plan, including the
operating budget contained therein, and any Shareholder may request that the Board of
Directors review the Company’s operating results and prospects, as well as market
conditions, and consider a proposal for amendment or review of the most recently
approved Business Plan at any regularly scheduled or special meeting of the Board of
Directors and upon such request, the Board of Directors shall in good faith make such
review and/or consider such proposal.

	(b)	 	Form and Scope. Each Business Plan shall contain a statement of long-range strategy
and short-range tactics detailing quantitative and qualitative goals for the Company and
relating the attainment of those goals to the Company’s manufacturing objectives, and shall
include such items as planned capital expenditures, planned product development, planned
product output and projected product cost, sales forecasts, total headcount, total spending
and revenue and profit projections, financing plans and tax planning. No Business Plan shall
be deemed to be an amendment of this Agreement. Any capital commitments made in any Business
Plan for a period after the Fiscal Year to which the Business Plan applies shall be considered
non-binding for purposes of any FA Operative Document.
	 
	(c)	 	Approval. Other than the initial Business Plan (which shall be approved in
accordance with Section 3.4(a)), the Board of Directors shall vote upon the proposed Business
Plan, with such modifications as it may deem necessary, before [*] preceding the
commencement of each Fiscal Year. Subject to Sections 10.3(c), (e) and (f) (Dispute
Resolution; Deadlock), pending approval by the Board of Directors of any proposed Business
Plan, the most recently approved Business Plan shall continue in effect; provided, however,
the Board of Directors may, by unanimous vote, adopt an amended interim business plan for the
Company’s operations until it is able to reach agreement on the proposed Business Plan for the
forthcoming year.
	 
	3.5	 	Standard of Care.

 

			
	*	 	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

 

EXECUTION VERSION

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

	 	(i)	 	one or more managers or employees of the Company who such Shareholder or
Director believes in good faith to be reliable and competent in the matters presented;
or
	 
	 	(ii)	 	legal counsel, public accountants or other Persons as to matters that such
Shareholder or Director believes to be within such Person’s professional or expert
competence.

	(b)	 	Each Shareholder shall also be entitled to rely upon information, opinions, reports or
statements, including financial statements and other financial data, prepared or presented by
the Board of Directors pursuant to the responsibilities delegated to the Board of Directors
pursuant to this Agreement.
	 
	3.6	 	Use of Names. Except as may be expressly provided in the FA Operative Documents,
nothing in this Agreement shall be construed as conferring on the Company or any Shareholder
the right to use in advertising, publicity or other promotional activities any name, trade
name, trademark or other designation of any other Shareholder or any of its Affiliates,
including any contraction, abbreviation or simulation of any of the foregoing.
	 
	4.	 	Actions by the Shareholders 
	 
	4.1	 	Matters Requiring the Approval of the Shareholders.
	 
	(a)	 	Notwithstanding any provision of the Articles to the contrary, no action shall be taken by or
on behalf of the Company in connection with any of the following matters without the prior
unanimous written approval of the Shareholders:

	 	(i)	 	any amendment, restatement or revocation of the Articles;
	 
	 	(ii)	 	any amendment to or renewal of any FA Operative Document between the Company
and any Shareholder or any of their respective Affiliates;
	 
	 	(iii)	 	any change in the scope of activity or strategic direction of the Company’s
business;
	 
	 	(iv)	 	any merger, consolidation or other business combination to which the Company or
any of its Subsidiaries is a party, or any other transaction to which the Company is a
party resulting in a Change of Control of the Company;
	 
	 	(v)	 	any sale, lease, pledge, assignment or other disposition of assets of the
Company in an amount (in terms of consideration to be received by the Company) in
excess of ¥5,000,000 in one transaction or a series of related transactions, other than
as

6

 

EXECUTION VERSION

	 	 	 	expressly provided for in the FA Operative Documents or as set forth in the most
recently approved Business Plan;
	 
	 	(vi)	 	the approval of any transaction or agreement between the Company and any
Shareholder or any of their respective Affiliates (other than transactions or
agreements expressly provided for or authorized by an FA Operative Document or the most
recently approved Business Plan) or any amendment thereto (including the waiver of any
material term thereof), other than any such transaction, agreement or amendment that
contains generally available, arm’s length commercial terms and is in an amount (in
terms of payments to be made or the value of services or products to be provided or
delivered) less than ¥5,000,000 for any single transaction or agreement or for
substantially identical transactions within a 24 month period (or a waiver that does
not materially adversely affect the rights and benefits of the Company), other than as
set forth in the most recently approved Business Plan;
	 
	 	(vii)	 	incurring Indebtedness in an amount in excess of ¥1,000,000 or an increase in
aggregate Indebtedness in excess of ¥1,000,000 in any calendar quarter, other than as
authorized by Section 5.1(d) (Matters Requiring the Approval of the Board of
Directors);
	 
	 	(viii)	 	with respect to the Company or any of its Subsidiaries, (A) the voluntary
commencement of any proceeding or the voluntary filing of any petition seeking relief
under Japanese or foreign bankruptcy, insolvency, receivership or similar law, (B) the
consent to the institution of, or the failure to contest in a timely and appropriate
manner, any involuntary proceeding or any involuntary filing of any petition of the
type described in clause (A) above, (C) the application for or consent to the
appointment of a receiver, trustee, custodian, sequestrator, conservator or similar
official for the Company, or for a substantial part of its property or assets, (D) the
filing of an answer admitting the material allegations of a petition filed against the
Company in any such proceeding described above, (E) the consent to any order for relief
issued with respect to any such proceeding described above, (F) the making of a general
assignment for the benefit of creditors, (G) the admission in writing of the Company’s
inability, or the failure of the Company generally, to pay its debts as they become due
or (H) the taking of any action for the purpose of effecting any of the foregoing;
	 
	 	(ix)	 	subject to Section 9.1(a) and Appendix A, the granting of consent to
the transfer of any Shares;
	 
	 	(x)	 	the winding up, dissolution or liquidation of the Company or any of its
Subsidiaries (other than the dissolution of the Company pursuant to and as contemplated
by Section 11 (Dissolution));
	 
	 	(xi)	 	the acquisition of any business, entry into any joint venture or partnership,
or creation of any direct or indirect Subsidiary of the Company;

7

 

EXECUTION VERSION

	 	(xii)	 	the commitment of the Company to any development project;
	 
	 	(xiii)	 	the sale, license, assignment or other Transfer of any of the Company’s intellectual
property owned or in its possession (including any technology or know-how, whether or
not patented, any trademark, trade name or service mark, any copyright or any software
or other method or process);
	 
	 	(xiv)	 	any increase or decrease in the capital amount of the Company, whether by
increasing the number of the Shares or otherwise;
	 
	 	(xv)	 	any other matter material to the operation, staffing, business or financial
condition of the Company; and
	 
	 	(xvi)	 	any matter required by the Companies Act to be decided, in the case of a
limited liability company (tokurei yugen kaisha) by its shareholders.

	(b)	 	Each Shareholder may exercise its vote by proxy; provided, that such proxy shall submit to
the Company, prior to the relevant General Meeting of Shareholders, as defined in the
Companies Act (the “General Meeting of Shareholders”), a power of attorney duly signed
by the Shareholder and/or other document establishing its power of representation; and
provided, further, that the conferment of the power of proxy for one General Meeting of
Shareholders shall not be deemed to be a conferment of the power of proxy for any subsequent
General Meeting of Shareholders.
	 
	(c)	 	Notwithstanding the requirements of Section 4.1(a) (Matters Requiring the Approval of the
Shareholders) relating to agreements between the Company and any Shareholder or any of their
respective Affiliates, any question regarding a material default or alleged material default
(including any question regarding a breach of representation or alleged breach of
representation) under any FA Operative Document between the Company and any Shareholder or any
of their respective Affiliates shall be subject to the dispute resolution process set forth in
Sections 10.3(a) and (b) (Dispute Resolution; Deadlock).
	 
	4.2	 	General Meetings of Shareholders.
	 
	(a)	 	An annual General Meeting of Shareholders shall be held within three (3) months from the date
immediately following the last day of each Fiscal Year of the Company. A special General
Meeting of Shareholders may be held at any time and may be called by a resolution of the Board
of Directors or in any other manner permitted by the Companies Act or the Articles. All
General Meetings of Shareholders shall be called and held in accordance with the Articles and
the Companies Act. The General Meetings of Shareholders may be held at the Company’s
principal office or at any other location, or, if all the Shareholders agree, and to the
extent then permitted by the Companies Act, by telecommunications conferences by means of
which all persons participating in the meeting can hear and be heard by each other, provided
that such communications equipment continues to be operational throughout the meeting. To the
extent then permitted by the Companies Act, the Shareholders may by unanimous written consent
effect any resolution that could otherwise be resolved at a meeting of the Shareholders.

8

 

EXECUTION VERSION

	(b)	 	Except as otherwise provided in this Agreement, each Shareholder shall be entitled to one
vote for each Share owned by such Shareholder.
	 
	(c)	 	The minutes of every General Meeting of Shareholders shall be kept with the Company’s records
referred to in Section 5.5 (Records).
	 
	(d)	 	The quorum necessary for any General Meeting of Shareholders shall be those Persons entitled
to cast all of the votes held by the Shareholders. A quorum shall be deemed not to be present
at any meeting for which notice was not properly given under the Articles or the Companies
Act, unless the Shareholder as to whom such notice was not properly given attends such meeting
without protesting the lack of notice or duly executes and delivers a written waiver of notice
or a written consent to the holding of such meeting.
	 
	4.3	 	Restrictions on Shareholders. No Shareholder may, without the prior written consent
of the other Shareholder:
	 
	(a)	 	confess any judgment against the Company;
	 
	(b)	 	enter into any agreement on behalf of or otherwise purport to bind the other Shareholder or
the Company;
	 
	(c)	 	do any act in contravention of this Agreement;
	 
	(d)	 	except as contemplated by Section 11 (Dissolution), dispose of the goodwill or the business
of the Company; or
	 
	(e)	 	assign the property of the Company in trust for creditors or on the assignee’s promise to pay
any Indebtedness of the Company.
	 
	5.	 	Management and Operations of Company 
	 
	5.1	 	Meetings of the Board of Directors.
	 
	(a)	 	General. The Shareholders agree to form a steering committee consisting of Directors
nominated by each of the Shareholders. The Shareholders acknowledge and agree that while
under the Companies Act a limited liability company (tokurei yugen kaisha) does not have a
board of directors, for convenience they will in this Agreement (and elsewhere in the FA
Operative Documents) refer to such committee as the “Board of Directors” (“yakuin kai”).
Except as otherwise provided herein, as between the parties the Board of Directors is vested
with complete and exclusive power to direct and control the Company and to manage the Company
as provided by the Articles and this Agreement, as it may be amended from time to time. The
Board of Directors shall have the power to delegate such responsibilities as it may deem
appropriate from time-to-time (including certain day-to-day responsibilities set forth in
Section 5.2 (Officers; Employees) and Section 5.3 (Y4 Operating Committee)). The Shareholders
shall cooperate in taking any necessary corporate steps under the Companies Act to attain the
purposes of this Section 5, including without limitation, approval by the Directors and
general meeting of shareholders with respect to decisions made by the Board of Directors.

9

 

EXECUTION VERSION

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

	 	(i)	 	The Board of Directors of the Company shall consist of six (6) Directors, three
(3) of which shall be nominated by Toshiba, and the other three (3) of which shall be
nominated by SanDisk; provided that the total number of Directors of the Company may be
changed by mutual agreement of the Shareholders. Each Shareholder shall vote its
Shares to elect as Directors those persons nominated by the other Shareholder.
	 
	 	(ii)	 	Directors shall be elected to serve until complete adjournment of the annual
meeting of Shareholders for the fiscal year last to end within one (1) year after his
or her assumption of the directorship, and shall be eligible for re-election.
	 
	 	(iii)	 	Subject to the fiduciary duty of Directors under the Companies Act, each
Director shall serve at the pleasure of the designating Shareholder and may be removed
as such, with or without cause, and his successor designated, by the designating
Shareholder. Each Shareholder shall have the right to designate a replacement Director
in the event of any vacancy among such Shareholder’s appointees. Each Shareholder
shall vote its Shares in favor of any such removal and in favor of any such replacement
Director.
	 
	 	(iv)	 	Each Shareholder shall bear any cost incurred by any Director nominated by it
to serve on the Board of Directors, and no Director shall be entitled to compensation
from the Company for serving in such capacity.
	 
	 	(v)	 	Each Shareholder shall notify the other Shareholder and the Company of the
name, business address and business telephone, e-mail address and facsimile numbers of
each Director that such Shareholder has nominated. Each Shareholder shall promptly
notify the other Shareholder and the Company of any change in such Shareholder’s
nominated or of any change in any such address or number.
	 
	 	(vi)	 	For purposes of any approval or action taken by the Board of Directors, each
Director shall have one vote. Unless otherwise required under Japanese law, unanimous
agreement of all Directors is required for valid action to be taken by the Board of
Directors.
	 
	 	(vii)	 	At any meeting of the Board of Directors, each Director may exercise his vote
by proxy; provided, that such proxy shall submit to the Company, prior to the relevant
meeting, a power of attorney duly signed by the Director and/or other document
establishing its power of representation; and provided, further, that the conferment of
the power of proxy for one meeting of the Board of Directors shall not be deemed to be
a conferment of the power of proxy for any subsequent meeting of the Board of
Directors.
	 
	 	(viii)	 	The quorum necessary for any meeting of the Board of Directors shall be those
Directors entitled to cast all of the votes held by the members of the Board of
Directors. A quorum shall be deemed not to be present at any meeting for which

10

 

EXECUTION VERSION

	 	 	 	notice was not properly given under Section 5.1(c) (Meetings, Notices, etc.), unless
the Director or Directors as to whom such notice was not properly given attend such
meeting without protesting the lack of notice or duly execute and deliver a written
waiver of notice or a written consent to the holding of such meeting.

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

	 	(i)	 	Regular meetings of the Board of Directors shall be held on such dates and at
such times as shall be determined by the Board of Directors and shall be held at least
on a quarterly basis, unless otherwise agreed by the Directors.
	 
	 	(ii)	 	Notice of any regular meeting or special meeting pursuant to Section
5.1(c)(iii) shall be given to each Director at least ten (10) Business Days prior to
such meeting in the case of a meeting in person or at least five (5) Business Days
prior to such meeting in the case of a meeting by conference telephone or similar
communications equipment pursuant to Section 5.1(c)(vii), which notice shall state the
purpose or purposes for which such meeting is being called and include any supporting
documentation relating to any action to be taken at such meeting.
	 
	 	(iii)	 	Special meetings of the Board of Directors may be called by any Director by
notice given in accordance with the notice requirements set forth in Section
5.1(c)(ii); provided that the Directors appointed by the Shareholder that is not
represented by the Director calling such special meeting shall be entitled to select a
convenient location for the meeting and to suggest an alternative time or times if the
designated time is not convenient for them. No action may be taken and no business may
be transacted at such special meeting which is not identified in such notice unless (A)
such action or business is incidental to the action or business for which the special
meeting is called or (B) such action or business does not materially adversely affect
any Shareholder or the Company.
	 
	 	(iv)	 	Each Shareholder may invite a reasonable number of observers to all meetings of
the Board of Directors.
	 
	 	(v)	 	The minutes of each meeting of the Board of Directors shall be delivered to all
Directors within twenty (20) calendar days after such meeting. Material to be
presented at a Board of Directors meeting shall be delivered to all Directors ten (10)
Business Days prior to such meeting if feasible in light of the circumstances giving
rise to the need for such meeting, or in any event a minimum of five (5) Business Days
prior to such meeting.
	 
	 	(vi)	 	The actions taken by the Board of Directors at any meeting, however called and
noticed, shall be as valid as though taken at a meeting duly held after regular call
and notice if (but not until), either before, at or after the meeting, each Director as
to whom such meeting was improperly held duly executes and delivers a written waiver of
notice or a written consent to the holding of such meeting; provided,

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EXECUTION VERSION

	 	 	 	however, any Director who is present at a meeting and does not protest the failure
of notice shall be deemed to have received adequate notice thereof. A vote of the
Board of Directors may be taken only (A) at a meeting of the members thereof duly
called and held or (B) without a meeting by the execution by the Directors eligible
to cast all the votes on the Board of Directors of a consent setting forth the
action so taken, and identified as a unanimous written consent of the Directors.
	 
	 	(vii)	 	Upon the consent of both Representative Directors, meetings of the Board of
Directors may be held by conference telephone or similar communications equipment by
means of which all Directors participating in the meeting can be heard by all other
participants; provided that such communications equipment continues to be operational
throughout the meeting. Any Director may elect to participate in a meeting by
conference telephone or similar communications equipment upon sufficient advance notice
to permit arrangements therefor to be made.
	 
	 	(viii)	 	At each meeting, the Board of Directors shall consider (A) any of the items set forth
in Section 5.1(d) (Matters Requiring the Approval of the Board of Directors) that may
require the Board of Directors’ attention, (B) any items added to the Board of
Directors’ agenda for discussion by any Shareholder and (C) such other matters as the
Board of Directors decides to review; provided, however, that the Directors shall not
be required to vote or take other action (other than carrying on discussions) on
matters that were not placed on the meeting agenda at least five (5) Business Days in
advance of the time set for the meeting unless such action or business is incidental to
the action or business which was otherwise properly on the agenda and considered at
such meeting.
	 
	 	(ix)	 	The Board of Directors shall, from time to time, elect one of its members to
preside at its meetings. The Board of Directors may establish reasonable rules and
regulations to (A) require officers to call meetings and perform other administrative
duties, (B) limit the number and participation of observers, if any, and require them
to observe confidentiality obligations and (C) otherwise provide for the keeping and
distribution of minutes and other internal Board of Directors governance matters not
inconsistent with the terms of this Agreement.
	 
	 	(x)	 	Subject to the Companies Act, the Board of Directors shall have the authority
to establish subcommittees and to delegate to any such subcommittee any of the Board of
Directors’ responsibilities; provided, however, the power of the Board of Directors to
approve the matters set forth in Section 5.1(d) (Matters Requiring the Approval of the
Board of Directors) may not be delegated to a subcommittee.

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

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EXECUTION VERSION

	 	(i)	 	any sale, lease, pledge, assignment or other disposition of assets of the
Company in an amount (in terms of consideration to be received by the Company) in
excess of ¥1,000,000 in one transaction or a series of related transactions, other than
as set forth in the most recently approved Business Plan;
	 
	 	(ii)	 	the approval of any transaction or agreement between the Company and any
Shareholder or any of their respective Affiliates (other than transactions or
agreements expressly provided for or authorized by an FA Operative Document or the most
recently approved Business Plan) or any amendment thereto (including the waiver of any
material term thereof), other than any such transaction, agreement or amendment that
contains generally available, arm’s length commercial terms and is in an amount (in
terms of payments to be made or the value of services or products to be provided or
delivered) less than ¥1,000,000 for any single transaction or agreement or for
substantially identical transactions within a 24 month period (or a waiver that does
not materially adversely affect the rights and benefits of the Company), other than as
set forth in the most recently approved Business Plan;
	 
	 	(iii)	 	the purchase, lease, license or other acquisition of (A) personal property or
services or (B) any list of capital equipment approved by the Shareholders, in each
case in an amount (in terms of payments to be made or the value of services of products
to be provided or delivered) exceeding ¥1,000,000 in any one transaction or a series of
related transactions, other than as provided for in the most recently approved Business
Plan;
	 
	 	(iv)	 	the selection of attorneys, accountants, auditors and financial advisors;
	 
	 	(v)	 	the adoption of accounting and tax policies, procedures and principles;
	 
	 	(vi)	 	incurring any Indebtedness;
	 
	 	(vii)	 	the hiring or termination of any employees referenced in Section 5.2(a)
(Officers; Employees) who are not members of the SanDisk Team, if any;
	 
	 	(viii)	 	the adoption of or changes to the forms of confidentiality, assignment or disclosure
of intellectual property or employment agreements to be entered into between the
Company and its employees;
	 
	 	(ix)	 	the adoption of or changes to any employee benefit plan, including any
incentive compensation plan;
	 
	 	(x)	 	the amount and timing of any distributions;
	 
	 	(xi)	 	the commencement or settlement of litigation by or against the Company;
	 
	 	(xii)	 	the purchase, sale or lease (as lessor or lessee) of any real property;
	 
	 	(xiii)	 	any acquisition of securities or any other ownership interest in any entity;

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EXECUTION VERSION

	 	(xiv)	 	the making of any public announcements by or on behalf of the Company;
provided, that in any case any such public announcements must otherwise comply with the
requirements of Section 5.2 (Public Announcements) of the Master Agreement, if
applicable;
	 
	 	(xv)	 	the entry into or amendment of any collective bargaining arrangements or the
waiver of any material provision or requirement thereof;
	 
	 	(xvi)	 	the approval of a proposed Business Plan, or the amendment to the most
recently approved Business Plan, in each case including the operating budget contained
therein;
	 
	 	(xvii)	 	the incurrence of capital expenditures in excess of those provided for in the most
recently approved Business Plan or the commitment of the Company to any development
projects other than as provided for in the most recently approved Business Plan;
	 
	 	(xviii)	 	subject to Section 5.1(c)(x), the establishment of any subcommittees or delegation
of authority of the Board of Directors;
	 
	 	(xix)	 	the authorization and approval of any filing with, public comments to, or
negotiation/discussion with, any Governmental Authority (excluding regular operating
filings and other routine administrative matters);
	 
	 	(xx)	 	the approval of Unique Activities to be performed by the Company at the request
of any Shareholder, in connection with which the Board of Directors shall be satisfied
that such Shareholder has reached agreement with the Company as to the payment by such
Shareholder of all costs incurred in connection with such Unique Activities and that
adequate provision has been made by such Shareholder for the funding of any additional
required capital expenditures required in conjunction with such Unique Activities;
	 
	 	(xxi)	 	the decision of the Company to negotiate external sources of additional wafer
fabrication capacity for NAND Flash Memory Products;
	 
	 	(xxii)	 	any dispute referred to the Board of Directors by the Y4 Operating Committee pursuant
to Section 5.3(b); and
	 
	 	(xxiii)	 	such other matters as the Board of Directors decides, in its sole discretion, to
review.

	5.2	 	Officers; Employees.

	(a)	 	Unless otherwise mutually agreed by the Shareholders, the Directors of the Company with
specific titles shall be designated as: the Representative Director/President/Chief Executive
Officer (“President”) and the Representative Director/Executive Vice President
(“Executive Vice President”). The President and Executive Vice President shall be
elected by the Board of Directors and serve three successive one-year terms, with the first

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EXECUTION VERSION

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

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

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

	5.3	 	Y4 Representatives; Y4 Operating Committee.
	 
	(a)	 	The Company shall have an Operating Committee for Y4 Facility operations (the “Y4
Operating Committee”) consisting of a senior executive designated by each of SanDisk and
Toshiba (each such individual the “SanDisk Representative” and the “Toshiba
Representative,” respectively) each of whom shall represent the designating Party on a
day-to-day basis at the Y4 Facility. Each Shareholder shall notify the other Shareholder in
advance of any replacement of its representative. If a Shareholder requests in good faith
that the other Shareholder’s representative be replaced with another person from the other
Shareholder’s organization, the other Shareholder shall consider and discuss in good faith
with the requesting Shareholder such request, provided that such replacement, if any, shall be
determined solely by such other Shareholder. [*]
	 
	(b)	 	The Y4 Operating Committee shall work together and endeavor to make the Y4 Facility the most
advanced and competitive memory fabrication facility in the world. The Y4 Operating Committee
shall have the authority to determine all matters concerning the day-to-day operations of the
Company and the Y4 Facility [*] subject to those matters reserved herein to the Board of
Directors or the Shareholders as well as to the requirements of this Agreement, the Articles
and the Companies Act. The Y4 Operating Committee shall communicate on a day-to-day basis with
respect to the status of Y4 Facility operations and any other issues that may arise, and shall
meet in person no less than two (2) times per week, or such other times and frequency as may
be agreed upon by all members of such committee. If the members of the Y4 Operating Committee
are unable to agree on any issue after thirty (30) days, they shall submit such matter
together

 

			
	*	 	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

 

EXECUTION VERSION

	 	 	with their respective recommendations to the Board of Directors, which shall endeavor to
immediately resolve the issue. If the Board of Directors is unable to agree on any such
issue after ten (10) days, such issue shall be submitted to the Management Committee for
final resolution.
	 
	(c)	 	The Y4 Operating Committee shall hold a monthly review meeting in English at the Yokkaichi
Facility on [*] of each calendar month, unless otherwise agreed by the Shareholders
or the Y4 Operating Committee. The Y4 Operating Committee shall prepare and distribute to
each Shareholder (at least three Business Days in advance of the monthly review meetings)
monthly reports in English with respect to the engineering activities, operations and
financial affairs of the Company and the Y4 Facility.
	 
	(d)	 	Upon the request of either Shareholder, the Y4 Operating Committee shall provide the
Shareholders with (i) any management or operation reports of the Company related to the Y4
Facility (which neither Shareholder shall have an obligation to translate) and (ii)
simultaneously in Japanese and English, those management and operating reports identified on
Schedule 5.3 as mutually agreed upon from time to time by the Parties. Upon reasonable
request from SanDisk, Toshiba employees shall explain such reports to SanDisk’s employees and
respond to questions from SanDisk’s employees; provided, however that SanDisk acknowledges and
agrees that Toshiba shall not be responsible for SanDisk’s failure to understand any such
reports.
	 
	5.4	 	Insurance. The Company shall maintain insurance against such liabilities and other
risks associated with the conduct by the Company of its business and in such amounts and
against such risks as agreed by the Shareholders, and in any event as is generally maintained
by companies engaged in a business similar to that of the Company.
	 
	5.5	 	Records. The Company shall maintain the following records at its principal office:
	 
	(a)	 	a current list of the full name set forth in alphabetical order and last known business
address of each Shareholder and Director;
	 
	(b)	 	a copy of the Articles, and all articles of amendment thereto;
	 
	(c)	 	a copy of this Agreement and all amendments hereto;
	 
	(d)	 	a copy of all financial statements of the Company for the three most recent Fiscal Years;
	 
	(e)	 	a copy of the Company’s income tax or information returns and reports, if any, for the three
most recent years;
	 
	(f)	 	a copy of all indentures, loan agreements, lease agreements, guarantees, security agreements,
promissory notes, licensing or other intellectual property agreements, agreements that relate
to the payment or receipt by the Company of amounts in excess of ¥5,000,000 or that are not
terminable by the Company upon ninety (90) days notice,

 

			
	*	 	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

 

EXECUTION VERSION

	 	 	documents, if any, evidencing employee compensation arrangements, employee pension or other
benefit arrangements, and similar documents and instruments executed and delivered by the
Company;
	 
	(g)	 	a list of all contributions made to the Company by the Shareholders; and
	 
	(h)	 	a record of all distributions by the Company to each Shareholder.

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

	6.	 	Capital Contributions; Distributions 
	 
	6.1	 	Capital Contributions.
	 
	(a)	 	The Shareholders shall be deemed to have made Capital Contributions to the Company in the
amounts set forth opposite their respective names on Schedule 6.1.
	 
	(b)	 	Except as provided in Section 2.1(b), no Shareholder shall be obligated to make any
additional Capital Contributions to the Company, unless otherwise mutually agreed upon by the
Shareholders in writing, in which case such additional Capital Contributions shall be made in
proportion to the Shareholders’ respective Percentages as of the date of such additional
Capital Contribution.
	 
	6.2	 	Distributions.
	 
	(a)	 	General. Notwithstanding any provision of the Articles to the contrary, and subject
to Section 11.8 (Liquidation Proceeds), unless otherwise agreed by the Shareholders, no
distributions of cash (or in the case of Section 11.8, other property) shall be made by the
Company to the Shareholders for a period of three (3) years from the date of this Agreement,
and thereafter all distributions of cash (or, in the case of Section 11.8, other property) by
the Company to the Shareholders shall be made in Japanese Yen at the times and in the amounts
determined by the Board of Directors. Except as provided in Section 11.8, each distribution
to the Shareholders shall be made on a pro rata basis based upon the respective Percentages of
the Shareholders as of the date of such distribution.
	 
	(b)	 	Distribution for Taxes. Notwithstanding Section 6.2(a), subject to the Companies Act
and other applicable law, the Company shall make, in respect of each Fiscal Year in which
SanDisk must recognize taxable income of the Company in SanDisk’s US federal, state and local
income and franchise tax returns, a distribution to SanDisk to the extent necessary to meet
SanDisk’s aggregate US tax liability with respect to such taxable income, with such liability
calculated at the highest US, state and local corporate tax rates as may be then applicable to
SanDisk. SanDisk will make a request upon the Company

17

 

EXECUTION VERSION

	 	 	for such distribution as soon as is practicable after the filing of SanDisk Corporation’s
applicable US tax returns. Following receipt of such request, the Company shall make the
requested distribution on the next date on which the Company is permitted to make
distributions pursuant to the Companies Act. Simultaneously therewith, the Company shall
also make a distribution to Toshiba in an amount equal to the amount of the per Share
distribution made to SanDisk pursuant to this Section 6.2(b). Any such prior distributions
shall be taken into account upon any purchase and sale of Shares under Section 10 (Certain
Agreements of the Shareholders) or dissolution of the Company under Section 11 (Dissolution)
hereof. If necessary, the Board of Directors shall consider capital reductions to the
extent that any such capital reduction will not adversely affect the Y4 Facility’s
operations.
	 
	6.3	 	No Interest. No interest shall be payable to the Shareholders on their Capital
Contributions or otherwise in respect of the capital of the Company.
	 
	6.4	 	Return of Capital Contributions. Except as expressly provided herein, no Shareholder
shall be entitled to the return of any part of such Shareholder’s Capital Contributions.
	 
	7.	 	Additional Contributions
	 
	 	 	No Shareholder shall be obligated under this Agreement or the Articles to contribute any
additional amounts to the Company or otherwise to be liable for the debts and obligations of
the Company.
	 
	8.	 	Accounting and Taxation 
	 
	8.1	 	Financial Accounting Conventions.
	 
	(a)	 	The Company shall adopt and follow Japanese GAAP.
	 
	(b)	 	Notwithstanding anything to the contrary in Appendix A, the first Fiscal Year shall
begin on the date of formation of the Company and end on March 31, 2007.
	 
	(c)	 	The Company shall in principle (but subject to applicable Law) utilize a five-year straight
line depreciation method for manufacturing equipment.
	 
	8.2	 	Maintenance of Books of Account. The Company shall keep or cause to be kept at its
principal office, or such other location as the Board of Directors shall designate, full and
complete books of account. The books of account shall be maintained in a manner that provides
sufficient assurance that transactions of the Company are recorded so as to comply with all
applicable laws and to permit (a) the preparation of the Company’s consolidated financial
statements in accordance with Japanese GAAP and (b) the Shareholders to account for their
interest in the Company in accordance with Japanese GAAP.
	 
	8.3	 	Financial Statements.

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EXECUTION VERSION

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

	 	(i)	 	As soon as practicable following the end of each Fiscal Quarter (and in any
event not later than ten (10) days after the end of such Fiscal Quarter), the Company
shall prepare and deliver to each Shareholder and each Director unaudited consolidated
and consolidating balance sheets of the Company as of the end of such Fiscal Quarter
and the related unaudited consolidated and consolidating statements of operations, the
Shareholders’ capital accounts and cash flows of the Company for such Fiscal Quarter
and for the Fiscal Year to date (or similar statements if such statements change as the
result of changes in Japanese GAAP), in each case setting forth in comparative form the
corresponding figures for the preceding Fiscal Quarter, for the corresponding Fiscal
Quarter of the preceding Fiscal Year and for the budget for the Fiscal Quarter just
completed and for the Fiscal Year to date.
	 
	 	(ii)	 	The financial statements for such Fiscal Quarter shall be accompanied by a
certificate of the principal accounting or financial officer of the Company to the
effect that such financial statements have been prepared under such officer’s

19

 

EXECUTION VERSION

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

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

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

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

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

	8.4	 	Other Reports and Inspection. The Company shall furnish promptly to each Shareholder
such other reports, financial data and information relating to the Company as such Shareholder
may reasonably request and shall require the Accountants to provide to each Shareholder copies
of any document related to the Company in the possession of the Accountants as such
Shareholder may reasonably request. The Company shall, upon reasonable prior notice and
during normal business hours, make available to each Shareholder and their respective
professional advisors, from time to time as requested by such Shareholder, all properties,
assets, books of account, corporate records, contracts and documentation, if any, relating to
employee benefits of the Company, and any other

 

			
	*	 	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.

20

 

EXECUTION VERSION

    
     material requested by such Shareholder for inspection and, in the case of books of account,
corporate records, contracts and documentation, if any, relating to employee benefits,
copying, and shall use reasonable efforts to make available to such Shareholder the
Accountants and the key employees of the Company for interviews to verify any information
furnished or to enable such Shareholder otherwise to review the Company and its operations.
The Company may condition such availability upon the entering into of reasonable and
appropriate confidentiality agreements. Notwithstanding the foregoing, the Company will not
make available to any Shareholder information provided to the Company on a confidential
basis by any other Shareholder without the consent of such other Shareholder.

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

     9. Shares of Contribution; Disposition of Shares 

     9.1 Restrictions on Transfer of Shares.

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

21

 

EXECUTION VERSION

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

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

	 	(i)	 	provides for the grant by such Shareholder to the Permissible Assignee of the
right to receive amounts equal to distributions received by such Shareholder from the
Company pursuant to Section 6 or 11 of this Agreement, but does not give the
Permissible Assignee any Shares or any other rights whatsoever with respect to the
Company;
	 
	 	(ii)	 	provides that under no circumstances (including any Bankruptcy Event in respect
of such Shareholder) may any claim be made by the Permissible Assignee against the
Company or any such Shareholder or any Affiliate of any such Shareholder or any of
their respective assets, under or in connection with such agreement, even if such
Shareholder defaults in performance thereunder;
	 
	 	(iii)	 	provides that the rights of the Permissible Assignee under such agreement may
not be transferred without the prior written consent of each Shareholder and that any
such Transfer without such consents shall be null and void;
	 
	 	(iv)	 	may not be amended, nor any provision thereof waived, in a manner that would
cause it not to be a Permissible Assignment Agreement, without the prior written
consent of the non-assigning Shareholder;
	 
	 	(v)	 	provides that the assigning Shareholder is authorized to Transfer its entire
interest in the Company pursuant to Section 9.1(a) free and clear of any interest of
the Permissible Assignee and without any liability on the part of the transferee
thereunder to the Permissible Assignee; and
	 
	 	(vi)	 	contains an express acknowledgment by the Permissible Assignee, for the benefit
of the non-assigning Shareholder and the Company, to the effect of clauses (i)-(v)
above.

	 	 	The assigning Shareholder shall ensure that any payment due to a Permissible Assignee
pursuant to or in connection with a Permissible Assignment Agreement shall be made in full
to such Permissible Assignee when due.
	 
	9.2	 	Admission of New Shareholders. No Person shall have the right to become a
Shareholder unless and until all the following conditions are satisfied:

22

 

EXECUTION VERSION

	(a)	 	except in the case of a Transfer of all of a Shareholder’s Shares to an Affiliate of such
Shareholder in accordance with Section 9.1(a) (Restrictions on Transfer of Shares), such
Person, the terms and conditions of such Person’s admission as a Shareholder and the rights
appurtenant to the Shares to be issued or Transferred, as applicable, to such Person are
approved by all existing Shareholders and, if applicable, the creation of any new class or
group of Shares in the Company having different rights, powers and duties is reflected in
amendments to the Articles and to this Agreement;
	 
	(b)	 	such Person executes a counterpart of this Agreement and such other instrument or instruments
as the Company and a non-transferring Shareholder may reasonably deem appropriate to affirm
that the representations and warranties contained in the Master Agreement are true and correct
with respect to such Person and that such Person agrees to be bound as a Shareholder by this
Agreement and all of the covenants and agreements herein; and
	 
	(c)	 	if requested by the Company, an opinion of counsel, a purchaser representation letter or
other appropriate documentation is furnished to the Company establishing that the issuance or
Transfer, as applicable, of Shares to the new Shareholder will comply with the Companies Act.
	 
	 	 	Except to the extent required by law, the Company shall have no obligation to recognize or
to furnish information or make distributions to any new Shareholder or any transferee of a
Shareholder who does not become a Shareholder in accordance with Section 9.1 (Restrictions
on Transfer of Shares) or this Section 9.2.
	 
	9.3	 	Withdrawal Prohibited. Except as otherwise expressly permitted by this Agreement,
(i) no Shareholder may withdraw from the Company and (ii) no Shareholder may effect or cause a
termination or dissolution of the Company without the prior written consent of all other
Shareholders (which consent may be withheld in such other Shareholder’s sole discretion).
	 
	9.4	 	Purchase of Additional Interest. At any time during the term of this Agreement and
so long as SanDisk is a Shareholder, SanDisk shall have the right to purchase from Toshiba
that number of Shares which is equal to 0.1% of the total number of Shares then issued and
outstanding in the event that (i) Toshiba’s patent umbrella does not adequately protect the
Company or (ii) dissolution of the Company is commenced pursuant to Section 11 hereof. The
purchase price of such Shares shall equal [*] as of the date of such transaction.
	 
	10.	 	Certain Agreements of the Shareholders
	 
	10.1	 	Taxes and Charges; Governmental Rules. Each Shareholder shall (a) promptly pay all
applicable Taxes and other governmental charges imposed against such Shareholder except to the
extent any such Taxes or other charges are being contested in good faith by appropriate
proceedings and (b) comply with all applicable Governmental Rules, in each

 

			
	*	 	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.

23

 

EXECUTION VERSION

	 	 	case except to the extent that nonpayment or noncompliance will not have a material adverse
effect on the Company.
	 
	10.2	 	Further Assurances. Following the Closing, each Shareholder shall, and shall cause
its Affiliates and the Company to take all reasonable actions necessary or appropriate to,
effectuate the transactions contemplated by this Agreement, and to obtain (and cooperate with
the other Shareholder in obtaining) any Governmental Action or third party consent required to
be obtained or made by it in connection with the transactions contemplated by this Agreement;
provided, that no Burdensome Condition shall be made to exist with respect to such Shareholder
or any of its Affiliates in connection therewith.
	 
	10.3	 	Dispute Resolution; Deadlock.
	 
	(a)	 	The Shareholders shall endeavor to settle, through their respective designees to the Board of
Directors, any disputes which may arise between them, including without limitation, failure by
the Board of Directors to reach agreement (or failure to take a vote) on any matter requiring
Directors approval pursuant to Section 5.1(d) (Matters Requiring the Approval of the Board of
Directors). The Shareholders shall attempt to resolve the issue or proposed action in
question, to the extent practicable, in a manner consistent with the Company’s most recently
approved Business Plan, unless the issue in dispute is the adoption of a new Business Plan, in
which case the provisions of Sections 10.3(c), (e) and (f) shall apply.
	 
	(b)	 	If (i) the Shareholders are unable to agree on any matter requiring the approval of the
Shareholders pursuant to Section 4.1(a) (Matters Requiring the Approval of the Shareholders),
(ii) the Board of Directors is unable to agree on any matter requiring the approval of the
Board of Directors pursuant to Section 5.1(d) (Matters Requiring the Approval of the Board of
Directors) (other than the approval of any Business Plan, with respect to which the failure to
agree shall be governed by Sections 10.3(c), (e) and (f)) or (iii) the Shareholders or the
Board of Directors are otherwise unable to resolve a dispute on any other item (other than the
approval of any Business Plan, with respect to which the failure to agree shall be governed by
Sections 10.3(c), (e) and (f)), then any Shareholder may bring the matter to the attention of
the General Manager Memory Division, Semiconductor Company of Toshiba, and the Chief Operating
Officer of SanDisk (the “Designated Individuals”), who will attempt to find a
resolution. If the matter has not been resolved within thirty (30) days of referral to the
Designated Individuals, the matter will be referred to the Management Committee for a final
decision, which decision will be final and binding on the Company and the Shareholders with
respect to any matter specified in Sections 10.3(b)(i) and (ii) above. If an agreement is
reached by the Management Committee, the mutually agreed resolution shall be implemented by
the Company. Should no solution be agreed upon within thirty (30) days after submission of
the matter to the Management Committee with respect to the matters specified in (iii) above,
such matter shall be submitted to arbitration in accordance with Section 2.5 of the Appendix
A. Should no solution be agreed upon within sixty (60) days after submission of the matter to
the Management Committee with respect to the matters specified in Sections 10.3(b)(i) and (ii)
above, then the action for which approval was

24

 

EXECUTION VERSION

	 	 	requested will not occur, unless it is already included in the most recently approved
Business Plan.
	 
	(c)	 	Except as provided below, if by [*] of any calendar year during the term of this
Agreement, commencing [*], the Board of Directors and the Shareholders have not approved and
agreed upon a Business Plan for the upcoming Fiscal Year, then any Shareholder may refer the
dispute to the Management Committee for a decision, which decision shall be final and binding
on the Company and the Shareholders. If a decision is reached by agreement of the Management
Committee, such decision shall be implemented by the Company. Should no decision be reached
within ninety (90) days after submission of the matter to the Management Committee, and unless
the Shareholders have agreed to continue operations under the most recently approved Business
Plan until a new Business Plan is approved, then within ten (10) Business Days thereafter any
Shareholder may elect by written notice to all other Shareholders to declare a deadlock
(“Deadlock”), except with respect to any issue where the Master Agreement expressly
prohibits declaration of a Deadlock.
	 
	(d)	 	If demand for both Shareholder’s NAND Flash Memory Products is significantly below
expectations, they shall address the matter as contemplated in Section 6.7(b)(ii) of the
Master Agreement.
	 
	(e)	 	Within thirty (30) days after a Shareholder has notified the other Shareholder of a Deadlock,
either Shareholder (the “Initiating Shareholder”) may submit to the other Shareholder
(the “Responding Shareholder”) a written irrevocable notice (the “Deadlock
Dissolution Notice”) to the effect that the Initiating Shareholder offers to sell to the
Responding Shareholder or its designee the Initiating Shareholder’s Shares for a cash payment,
by wire transfer of immediately available Japanese Yen, in an amount equal to the [*] as of
the date of such transaction multiplied by the Initiating Shareholder’s Percentage as of such
date.
	 
	(f)	 	The Responding Shareholder may accept such offer by written response to the Initiating
Shareholder within forty-five (45) days of receipt of the Deadlock Dissolution Notice
indicating that the Responding Shareholder elects to purchase the Shares of the Initiating
Shareholder. If the Responding Shareholder declines to exercise its right to purchase the
Shares of the Initiating Shareholder pursuant to this Section 10.3 or fails to respond to such
Deadlock Dissolution Notice (or if both Shareholders submit Deadlock Dissolution Notices), the
Company shall be dissolved pursuant to Section 11.1(d) (Events of Dissolution), at the end of
a one-year period for the wind-down of operations commencing with the receipt of the Deadlock
Dissolution Notice by the Responding Shareholder. During such one-year period, the Company’s
business shall be conducted in accordance with the most recently approved Business Plan except
that additional capital expenditures will not be made except as required for line maintenance.
	 
	10.4	 	Remedies Upon Event of Default; Termination on Breach. If there has occurred and is
continuing an Event of Default with respect to a Shareholder (upon such occurrence, such

 

			
	*	 	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.

25

 

EXECUTION VERSION

	 	 	Shareholder is referred to herein as the “Defaulting Shareholder”), in addition to
all other remedies available to the Company or the other Shareholder (the “Nondefaulting
Shareholder”), whether under any of the FA Operative Documents or other agreements or by
law, the Nondefaulting Shareholder shall have the option to take one or more of the
following actions:
	 
	(a)	 	give written notice to the Defaulting Shareholder of its intention to acquire all of the
Shares of the Defaulting Shareholder for a cash payment, by wire transfer of immediately
available Japanese Yen, in an amount equal to the [*] as of the date of such
transaction multiplied by the Defaulting Shareholder’s Percentage as of such date; and/or
	 
	(b)	 	elect to dissolve the Company pursuant to Section 11.3 (Dissolution Upon Event of Default),
in which case the affairs of the Company shall be wound up and the Company shall be dissolved
in accordance with Section 11 (Dissolution).
	 
	10.5	 	Mechanics of Sale.
	 
	(a)	 	The closing of any purchase and sale of Shares pursuant to Section 10.3 (Dispute Resolution;
Deadlock), 10.4 (Remedies Upon Event of Default; Termination on Breach), 11.4 (Dissolution by
Unilateral Option) or 11.5 (Dissolution Upon Notice) shall take place not later than the
thirtieth (30th) Business Day after notice of the purchase is given, as the case may be,
except that such period shall be extended as necessary in order to comply with any
Governmental Rule. The purchasing Shareholder shall pay for the Shares being acquired by wire
transfer of immediately available funds in Japanese Yen to an account specified by the selling
Shareholder. The selling Shareholder shall execute all documents necessary to effect the
conveyance of its Shares, free and clear of all Liens, to the purchasing Shareholder. In
addition, the Shareholders shall enter into an indemnity and release agreement, in a form
reasonably satisfactory to each Shareholder, indemnifying and holding harmless the selling
Shareholder and its Affiliates for liabilities or claims made after the date of the purchase
and sale under any guarantees or other agreements supporting the obligations of the Company
which may have been extended by the selling Shareholder or any of its Affiliates. The
Shareholders shall also reach agreement on a reasonable transition plan of up to six months in
connection with services provided to the Company by members of the SanDisk Team assigned to
the Company by the Selling Shareholder.
	 
	(b)	 	If a Shareholder elects to acquire all of the Shares of the other Shareholder pursuant to
Section 10.3 (Dispute Resolution; Deadlock), 10.4 (Remedies Upon Event of Default; Termination
on Breach), 11.4 (Dissolution by Unilateral Option) or 11.5 (Dissolution Upon Notice), such
Shareholder shall be obligated to take all actions required of it to consummate the applicable
purchase and sale on the date determined pursuant to this Section 10.5 (Mechanics of Sale).
If any Shareholder has the right to purchase the Shares of any other Shareholder, such
Shareholder shall have the right to assign such right to purchase to any other Person.

 

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

26

 

EXECUTION VERSION

	11.	 	Dissolution 
	 
	11.1	 	Events of Dissolution. The Company shall be dissolved and shall commence winding up
its affairs upon the first to occur of the following. The Shareholders shall cooperate in
taking any necessary corporate steps under the Companies Act to attain the purpose of this
Section 11:
	 
	(a)	 	the expiration of the term of the Company pursuant to Section 2.4 (Term; Extension);
	 
	(b)	 	the agreement of the Shareholders to dissolve the Company pursuant to Section 11.2
(Dissolution by Agreement);
	 
	(c)	 	the election of the Nondefaulting Shareholder pursuant to Section 11.3 (Dissolution Upon
Event of Default);
	 
	(d)	 	the first anniversary of the receipt by either Shareholder of a Deadlock Dissolution Notice
submitted with respect to a failure of the Shareholders to approve and agree upon a Business
Plan pursuant to Section 10.3 (Dispute Resolution; Deadlock) if either (i) the Responding
Shareholder declines to exercise its right to purchase the Shares of the Initiating
Shareholder or fails to respond to such Deadlock Dissolution Notice, or (ii) both Shareholders
submit Deadlock Dissolution Notices with respect to such failure to agree;
	 
	(e)	 	the election by Toshiba to dissolve the Company pursuant to Section 11.4 (Dissolution by
Unilateral Option);
	 
	(f)	 	the bankruptcy, death, dissolution, expulsion or incapacity of a Shareholder or the
occurrence of any other event which terminates the membership of a Shareholder in the Company
(“Bankruptcy Event”); or
	 
	(g)	 	the election of the Notifying Party to dissolve the Company pursuant to Section 11.5
(Dissolution Upon Notice) unless the Notified Party elects to purchase the Shares of the
Notifying Party pursuant to Section 11.5 (Dissolution Upon Notice).
	 
	11.2	 	Dissolution by Agreement. The Company may be dissolved at any time by the unanimous
written consent of the Shareholders.
	 
	11.3	 	Dissolution Upon Event of Default. During the occurrence and continuation of an
Event of Default (other than a Bankruptcy Event) with respect to a Shareholder, the
Nondefaulting Shareholder may elect, by written notice to the Defaulting Shareholder, to
dissolve the Company, in which event the Company shall be dissolved and the Shareholders shall
take all actions necessary to wind up the affairs of the Company in accordance with Section
11.7 (Winding Up). This Section 11.3 shall not be construed to limit the rights of the
Nondefaulting Shareholder under Section 10.4 (Remedies Upon Event of Default) or to seek
damages from the Defaulting Shareholder or any other Person for the breach of its obligations
under any of the FA Operative Documents.

27

 

EXECUTION VERSION

	11.4	 	Dissolution by Unilateral Option. At any time between April 1, 2009 and March 31,
2010, SanDisk may, by giving written notice to Toshiba, elect to withdraw from the Company, in
which case Toshiba must, directly or through any of its Affiliates, either (i) purchase from
SanDisk all of SanDisk’s Shares within one (1) year following SanDisk’s notice to withdraw for
a cash payment, by wire transfer of immediately available Japanese Yen, in an amount equal to
the [*] as of the FA Termination Date multiplied by SanDisk’s Percentage as of the Termination
Date (the estimated [*] as of the Termination Date to be agreed by the Shareholders in good
faith and any necessary true up payments promptly after the actual [*] as of the Termination
Date is determined), or (ii) cooperate with SanDisk to dissolve the Company within one (1)
year of the notice of withdrawal and to wind-up its affairs in accordance with Section 11.7
(Winding Up) (the date as of which any Shareholder, itself or together with its Affiliates,
holds all Shares of the Company or the date the Company is dissolved in accordance with
applicable Law, the “Termination Date,” but in no event shall the Termination Date
occur later than one (1) year following SanDisk’s notice to withdraw).
	 
	11.5	 	Dissolution upon Notice. At any time between April 1, 2013 and March 31, 2014, any
Shareholder (the “Notifying Party”) may elect, by giving notice to all other
Shareholders (the “Notified Party”), to dissolve the Company, in which event the
Company will be dissolved and, within the one (1) year period following the giving of such
notice, the Shareholders shall mutually agree upon a plan for winding up the affairs of the
Company in accordance with Section 11.7 (Winding Up), unless the Notified Party, directly or
through any of its Affiliates, elects in writing within three (3) months of receiving such
notice, to purchase from the Notifying Party all of its Shares for a cash payment, by wire
transfer of immediately available Japanese Yen, in an amount equal to the [*] as of the date
of such transaction multiplied by the Notifying Party’s Percentage as of such date.
	 
	11.6	 	Financing Defaults.
	 
	(a)	 	If pursuant to Section 6.5(c)(i) of the Master Agreement either Party, as the Investing
Party, exercises its election to terminate this Agreement, the Shareholders shall cooperate in
good faith to effect the purchase by Toshiba (or its designated Affiliate) and sale by SanDisk
of all of SanDisk’s Shares, at a price equal to SanDisk’s percentage share of the issued and
outstanding Shares in the Company multiplied by the [*] as of the date such transaction is
closed (with estimated [*] as agreed by the Shareholders in good faith paid on the closing of
such transaction and any true-up payment made by the appropriate Party promptly after
determination of the actual [ * ] as of the closing of such purchase and sale
transaction).
	 
	(b)	 	[*]
	 
	(c)	 	If pursuant to Section 6.12(d)(ii)of the Master Agreement either Party, as the Non-Defaulting
Party, exercises its election to terminate this Agreement, the Non-Defaulting Party shall have
the same rights as provided in Section 11.6(a) and the Shareholders shall cooperate in good
faith to effect the purchase by the Non-Defaulting Party (or its

 

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

28

 

EXECUTION VERSION

	 	 	designated Affiliate) and sale by the Defaulting Party of all of the Defaulting Party’s Shares.
	 
	11.7	 	Winding Up.
	 
	(a)	 	Upon the dissolution of the Company, the Shareholders shall proceed as promptly as
practicable to (i) wind-up the affairs of the Company and satisfy the Company’s liabilities,
(ii) dispose of the Company’s assets as quickly as possible consistent with obtaining the full
fair market value of the Company, preferably, to the extent it is commercially practicable to
do so, by selling the Company as a going concern (provided, however, no Shareholder shall be
under any obligation to extend the terms of any FA Operative Document or to offer to enter
into any other agreement with a prospective purchaser of the Company for the purchase or sale
of goods or services or the use of facilities or any other business arrangement), and (iii)
distribute any net proceeds to the Shareholders in accordance with Section 11.8 hereof and
applicable Law. In connection with a sale of the Company’s assets under clause (ii), each
Shareholder or any of their respective Affiliates shall have a right of first offer to acquire
the Company’s tangible personal property in the liquidation process and may also acquire such
property through participation at auction except in the event of a dissolution pursuant to
Section 11.3 (Dissolution Upon Event of Default), in which event the Defaulting Shareholder
and its Affiliates shall not have such right of first offer to acquire the Company’s tangible
personal property. Each of the Shareholders shall be furnished with a statement setting forth
the assets and liabilities of the Company as of the date of the complete liquidation of the
Company. The Accountants shall review the final accounting and shall render their opinion
with respect thereto.
	 
	(b)	 	During the period of winding-up, the Company shall continue to operate and all the provisions
of this Agreement shall remain in effect, except as otherwise expressly provided herein. The
Company shall notify all known creditors and claimants of the dissolution of the Company in
accordance with applicable law.
	 
	11.8	 	Liquidation Proceeds.
	 
	(a)	 	In the case of the dissolution and liquidation of the Company, the Company may make a
distribution in kind. Any cash and all distributions in kind that are to be distributed shall
be distributed to the Shareholders, on a pro rata basis based upon the respective Percentages
of the Shareholders as of the date of such distribution.
	 
	(b)	 	Unless otherwise agreed by the Shareholders, and to the extent permitted under any agreements
with third parties, all assets to be distributed upon the dissolution and liquidation of the
Company shall be distributed as follows:

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

29

 

EXECUTION VERSION

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

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

	(c)	 	Any distribution made pursuant to this Section 11.8 shall be made as soon as practicable
under and in accordance with applicable Japanese law.
	 
	12.	 	Indemnification and Insurance 
	 
	12.1	 	Indemnification.
	 
	(a)	 	Subject to Section 12.1(c), the Company shall indemnify each Person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (including an action by
or in the right of a Shareholder or the Company), by reason of the fact that such Person is or
was a Shareholder or is or was or has agreed to become a Director or is or was serving or has
agreed to serve at the request of the Company as a director, officer, employee or agent of the
Company or of another partnership, corporation, joint venture, trust or other enterprise,
arising from any action alleged to have been taken in any such capacity or by reason of any
liability or obligation of the Company, against any and all losses, damages, liabilities,
costs, charges, expenses (including interest, penalties and reasonable attorneys’ fees and
expenses), judgments, fines and amounts paid in settlement (collectively, “Losses”)
actually and reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom. Without limiting the generality of the foregoing, any
of such Losses shall be deemed to arise out of a Company liability or obligation if it arises
out of or is based upon the conduct of the business of the Company (or any of its
Subsidiaries) or the ownership of the property of the Company (or any of its Subsidiaries).
	 
	(b)	 	The indemnification provided under this Section 12.1 shall inure to the benefit of the
successors, heirs and personal representatives of any Person entitled to the benefit of such
indemnification. Such indemnification shall be a contract right and shall include the right
to be paid advances of reasonable expenses incurred by any such Person in connection with such
action, suit or proceeding.
	 
	(c)	 	The indemnification provided under this Section 12.1 shall not inure to the benefit of any
Person in respect of Losses to the extent that such Losses (i) arise out of or are based upon
the gross negligence or willful misconduct of such Person or (ii) constitute a tax, levy or
similar governmental charge not imposed upon the Company (or any of its Subsidiaries) or on
their respective properties. The indemnification provided under this Section 12.1 shall also
not be available to any Person in respect of any Losses if a judgment or other final
adjudication adverse to such Person establishes (x) that such Person’s acts were committed in
bad faith or were the result of active and deliberate dishonesty and were material to the
cause of action so adjudicated or (y) that such Person gained in fact a financial profit or
other advantage to which such Person was not legally

30

 

EXECUTION VERSION

	 	 	entitled. It is understood and agreed that, for the purposes of this Section 12.1, Losses
shall be deemed not to arise out of or be based upon the gross negligence or willful
misconduct of a Person solely because it arises out of or is based upon the gross
negligence, willful misconduct, bad faith or active and deliberate dishonesty of a director,
officer or employee of such Person if at the time of such gross negligence, willful
misconduct, bad faith or active and deliberate dishonesty, such director, officer or
employee was also a member of the SanDisk Team or a Director acting in his capacity as such.
	 
	(d)	 	The termination of any action, suit or proceeding by judgment, order, settlement, conviction
or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption
that the indemnified Person did not meet the standard set forth in Section 12.1(c)
(Indemnification).
	 
	12.2	 	Insurance. The Company may, to the fullest extent permitted by law, purchase and
maintain insurance against any liability that may be asserted against any Person entitled to
indemnity pursuant to Section 12.1.
	 
	12.3	 	Indemnification by the Shareholders.
	 
	(a)	 	Each Shareholder agrees to, and does hereby, indemnify and hold harmless the Company and the
other Shareholder from and against any and all Losses arising out of, or based upon, the gross
negligence or willful misconduct of such Shareholder under this Agreement or such Shareholder
exceeding its authority under this Agreement.
	 
	(b)	 	The provisions of this Section 12.3 shall survive each of the termination of this Agreement,
the dissolution of the Company and the withdrawal of any Shareholder.
	 
	12.4	 	Assertion of Claims.
	 
	(a)	 	In the event that a Person (the “Indemnified Party”) desires to assert its right to
indemnification from a Person (an “Indemnifying Party”) required to indemnify such
Indemnified Party under this Section 12, the Indemnified Party will give the Indemnifying
Party prompt notice of the claim giving rise thereto (a “Claim”), and the Indemnifying
Party shall undertake the defense thereof (unless the Claim is asserted against or related to
or results from any action or failure to take action by such Indemnifying Party). The failure
to promptly notify the Indemnifying Party hereunder shall not relieve the Indemnifying Party
of its obligations hereunder, except to the extent that the Indemnifying Party is actually
prejudiced by the failure to so notify promptly.
	 
	(b)	 	The Indemnified Party shall not settle or compromise any Claim without the written consent of
the Indemnifying Party unless the Indemnified Party agrees in writing to forego any and all
claims for indemnification from the Indemnifying Party with respect to such Claim. However,
if the Indemnifying Party, within a reasonable time after notice of any such Claim, fails to
defend such Claim, the Indemnified Party shall have the right to undertake the defense,
compromise or settlement of such Claim on behalf of and for the account and risk of the
Indemnifying Party, subject to the right of the Indemnifying Party

31

 

EXECUTION VERSION

	 	 	to assume the defense of such Claim at any time prior to settlement, compromise or final
determination thereof.
	 
	13.	 	If the Indemnifying Party has undertaken the defense of a Claim and (i) if there is a
reasonable expectation that (x) a Claim may materially and adversely affect the Indemnified
Party other than as a result of money damages or other money payments or (y) the Indemnified
Party or Shareholders may have legal defenses available to it or them that are different from
or additional to the defenses available to the Indemnifying Party, or (ii) if the Indemnifying
Party shall not have employed counsel reasonably satisfactory to the Indemnified Party, the
Indemnified Party shall nevertheless have the right, at the Indemnifying Party’s cost and
expense, to defend such Claim. Miscellaneous
	 
	13.1	 	Governing Law. Notwithstanding anything to the contrary in Appendix A, this
Agreement shall in all respects be governed by and construed in accordance with the laws of
Japan, without regard to the conflict of laws principles.
	 
	13.2	 	Effectiveness. This Agreement shall be effective as of the date first written above
and shall remain in effect until the Termination Date. Sections 7, 11.7, 11.8 and 13 shall
survive the Termination Date.

[REST OF PAGE INTENTIONALLY LEFT BLANK]

32

 

EXECUTION VERSION

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

	 	 	 	 	 	 	 	 	 
	 	 	TOSHIBA CORPORATION	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Masashi Muromachi	 	 
	 

	 	 	 	Title:
	 	President and CEO	 	 
	 

	 	 	 	 	 	Semiconductor Company	 	 
	 

	 	 	 	 	 	Corporate Executive Vice President	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	SANDISK (IRELAND) LIMITED	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Sanjay Mehrotra	 	 
	 

	 	 	 	Title:
	 	Director	 	 

[Signature Page to Flash Alliance Operating Agreement]

 

 

EXHIBIT A

ARTICLES OF INCORPORATION OF THE COMPANY

[*]

      

      

      

      

      

 

			
	*	 	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

 

Unofficial English Translation

ARTICLES OF INCORPORATION

OF

FLASH ALLIANCE, LTD.

[*]

      

      

      

      

      

      

      

      

 

			
	*	 	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

 

Unofficial English Translation

Schedule 2.1(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.

 

 

Schedule 5.3

Management and Operating Reports

[*]

      

      

      

      

      

      

 

			
	*	 	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.

 ii 

 

 

Schedule 6.1

Capital Contributions 

[*]

      

      

      

      

      

      

 

			
	*	 	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.

 iii 

 

 

Schedule 8.3

[*]

      

      

      

      

      

      

 

			
	*	 	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.

 iv

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