Document:

exv10w5

 

EXHIBIT 10.5

FOIA Confidential Treatment Requested

Execution Version

FLASH ALLIANCE MUTUAL CONTRIBUTION

AND ENVIRONMENTAL INDEMNIFICATION AGREEMENT

This FLASH ALLIANCE MUTUAL CONTRIBUTION AND ENVIRONMENTAL INDEMNIFICATION AGREEMENT, dated as of
July 7, 2006 (this “Agreement”), is entered into by and among, on one side, Toshiba
Corporation, a Japanese corporation (“Toshiba”), and, on the other side, SanDisk (Ireland)
Limited, a company organized under the laws of the Republic of Ireland (“SanDisk Ireland”,
and together with Toshiba, the “Parties”).

RECITALS

     WHEREAS, Toshiba, SanDisk Corporation and SanDisk (Cayman) Limited, a company organized under
the laws of the Cayman Islands, are parties to that certain Mutual Contribution and Environmental
Indemnification Agreement, dated as of September 10, 2004, setting forth the terms and conditions
relating to environmental issues that arise out of the manufacture of Y3 NAND Flash Memory Products
manufactured at the Y3 Facility;

     WHEREAS, Toshiba, SanDisk Ireland and SanDisk Corporation are parties to that certain Flash
Alliance Master Agreement, dated as of the date hereof (the “Flash Alliance Master
Agreement”);

     WHEREAS, pursuant to the terms of the Flash Alliance Master Agreement and other FA Operative
Documents, Flash Alliance, Ltd., a Japanese tokurei yugen kaisha (the “Company”), will have
Y4 NAND Flash Memory Products manufactured at the Y4 Facility; and

     WHEREAS, Toshiba and SanDisk Ireland have agreed to mutually contribute to, and indemnify each
other and the Company for, environmental remediation costs or liability resulting from the Y4 NAND
Flash Memory Product manufacturing operations as set forth below.

     NOW, THEREFORE, the Parties agree as follows:

	1.	 	Definitions and Interpretation.
	 
	1.1	 	Flash Alliance Master Agreement. Appendix A to the Flash Alliance Master
Agreement is hereby incorporated into this Agreement. Capitalized terms used but not defined
in this Agreement shall have the meanings given to them in Appendix A.
	 
	1.2	 	Definitions. The following terms used in this Agreement shall have the following
respective meanings:
	 
	(a)	 	“Environmental Laws” means all Applicable Laws in Japan, including, but not limited
to, the Soil Contamination Control Law (Dojyouosen Taisaku Ho, Law No. 53 of 2002), now or
hereafter in effect relating to the protection of human health, safety, and the environment
from emissions, discharges, releases or threatened releases of pollutants, contaminants
(chemical or industrial), toxic or Hazardous Substances or wastes into the

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	 	 	environment (including, ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata), or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling or investigation or remediation of
pollutants, contaminants, chemicals or industrial, toxic or Hazardous Substances or wastes.
	 
	(b)	 	“Hazardous Substances” means petroleum, petroleum hydrocarbons or petroleum products,
petroleum by-products, radioactive materials, asbestos or asbestos-containing materials,
pesticides, radon, urea formaldehyde, lead or lead- containing materials, polychlorinated
biphenyls; and any other chemicals, materials, substances or wastes in any amount or
concentration which are now or hereafter become defined as or included in the definition of
“hazardous substances,” “hazardous materials,” “hazardous wastes,” “extremely hazardous
wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants,” “pollutants,”
“regulated substances,” “solid wastes,” or “contaminants” or words of similar import, under
any Environmental Law.
	 
	2.	 	Environmental Investigations.
	 
	2.1	 	Environmental Consultants. The Parties acknowledge that each of SanDisk and Toshiba
has engaged an environmental consulting company to conduct an environmental investigation on
its behalf as to the surface and subsurface conditions existing on or immediately adjacent to
the proposed site of the Y4 Facility and other new land to be acquired or leased by Toshiba
for the purpose of the Y4 Facility’s operation including the parking lot (such new land to be
acquired or leased, the “Other Y4 Facility”) (each a “Consultant” and the
Consultant engaged by SanDisk, the “SanDisk Consultant” and the Consultant engaged by
Toshiba, the “Toshiba Consultant”). SanDisk shall be solely responsible for the fees
and costs charged by the SanDisk Consultant and shall indemnify and hold harmless Toshiba and
the Company from any claims for compensation or damages made by the SanDisk Consultant.
Toshiba shall be solely responsible for the fees and costs charged by the Toshiba Consultant
and shall indemnify and hold harmless SanDisk and the Company from any claims for compensation
or damages made by the Toshiba Consultant; provided, however, that fees and costs incurred by
the Toshiba Consultant after the Closing and other than in connection with finalizing the Y4
Baseline Environmental Report (as defined below) shall be chargeable to and payable by the
Company, which fees and costs shall be chargeable to and payable by the Parties through wafer
price increases.
	 
	2.2	 	Scope of Review. Each Consultant will perform the activities customarily associated
with Phase I (tochirireki chosa) and Phase II (osen jokyo kakunin chosa) studies.
The Consultant(s) will perform Phase I and Phase II studies on the site of the Y4 Facility.
The Consultant(s) will perform Phase I studies on the sites of the Other Y4 Facilities, and
depending on the results of Phase I testing, may perform Phase II studies on any of such
sites. Such activities will be performed at the proposed site of the Y4 Facility (and
immediately adjacent thereto) and Other Y4 Facilities prior to the start of construction

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	 	 	(scheduled to begin July 1, 2006); provided, however, that the Parties acknowledge that the
SanDisk Consultant will not be permitted to obtain soil or water samples from those areas
identified on Exhibit A (such areas, the “Untested Areas”). Subject to the
requirements of the owner of the Other Y4 Facilities, each Consultant will have all access
to the proposed site of the Y4 Facility and Other Y4 Facilities to the extent necessary to
conduct the Phase I and Phase II studies.
	 
	2.3	 	Information from Monitoring Activities. Toshiba shall share, or cause to be shared,
with SanDisk and, upon SanDisk’s request, the SanDisk Consultant, the results of any
monitoring activities conducted by Toshiba or its Affiliates with respect to the surface and
subsurface conditions on the proposed site of the Y4 Facility and Other Y4 Facilities on or
after the Effective Date and until the FA Termination Date; provided that if as of the FA
Termination Date any claims have been made against SanDisk with respect to its indemnification
obligations hereunder, on SanDisk’s request, Toshiba shall continue to provide SanDisk the
results of any monitoring activities to the extent such results may affect the evaluation or
determination of alleged liability of SanDisk hereunder. The Parties acknowledge and agree
that any such information concerning the Y4 Facility and Other Y4 Facilities shall be
considered Confidential Information of the Company and any such information concerning the
Yokkaichi Facility (including the Y4 Facility and Other Y4 Facilities) shall be considered
Confidential Information of Toshiba.
	 
	3.	 	Baseline Environmental Report. 
	 
	 	 	Each Party shall direct the Consultant retained by it to (i) provide the other Consultant
and other Party with its initial environmental report on the Y4 Facility and Other Y4
Facilities and (ii) discuss the reports in good faith with the other Consultant with the
intent of the Parties and their Consultants agreeing upon a single, combined report (the
“Y4 Baseline Environmental Report”). If Toshiba, SanDisk and the Consultants are
unable to agree upon a single report within sixty (60) days after the Closing, then the
draft reports of both Consultants (or combined report indicating areas of disagreement)
shall collectively be considered to be the Y4 Baseline Environmental Report.
	 
	4.	 	Environmental Compliance. 
	 
	4.1	 	Compliance. The Parties confirm their intent that the Y4 Facility and Other Y4
Facilities and all operations of the Company be maintained in compliance with all
Environmental Laws, including by having remedial measures taken as required by any
Governmental Authority or otherwise reasonably necessary to ensure that the Y4 Facility and
Other Y4 Facilities and all operations of the Company will remain in compliance with all
Environmental Laws.
	 
	4.2	 	Notice. Each Party shall promptly notify the other of any circumstances of which it
becomes aware that require or could reasonably be expected to require remediation or other
actions to ensure that the Company and its operations are and will be maintained in compliance
with all Environmental Laws and to minimize the aggregate Covered

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	 	 	Environmental Costs (as defined below) that may be incurred. Upon any such notice being
given and received, the Parties shall promptly discuss in good faith and seek to agree upon
the measures to be taken in response to such circumstances. Pending their agreement,
nothing shall prevent or limit Toshiba, acting in good faith on its own initiative or upon
SanDisk’s reasonable request, from investigating the circumstances of any releases of
Hazardous Substances or taking steps reasonably appropriate to limit or prevent ongoing
releases, to limit the effects of a release, or to prevent or limit any exposure or damage
resulting from, arising out of or otherwise by virtue of a release, including taking
immediate or urgent steps as appropriate in light of the circumstances then known, provided,
that nothing in this paragraph shall require either Party to take any step except as
required by applicable Environmental Law.
	 
	5.	 	Indemnification Obligations.
	 
	5.1	 	Mutual Responsibility and Indemnity for Environmental Costs.
	 
	(a)	 	Subject to Section 5.1(b), each of SanDisk and Toshiba shall:

	 	1.	 	be responsible for bearing 50% of all costs, expenses or liability
(including claims by third parties or any Governmental Authority) resulting from
any contamination from the release or discharge of Hazardous Substances resulting
from, arising out of or otherwise by virtue of the construction or operation of the
Y4 Facility or Other Y4 Facilities from the Closing until the FA Termination Date,
including any and all costs to investigate, remove or remediate any release of
Hazardous Substances or otherwise reasonably necessary to assure that the Company
and the Y4 Facility and Other Y4 Facilities are and will (until the FA Termination
Date) remain in compliance with then applicable Environmental Laws
(“Environmental Costs”); and
	 
	 	2.	 	indemnify, defend and hold harmless the other Party and the Company
(and their respective Indemnified Parties) for its 50% share of all Environmental
Costs.

	(b)	 	Each of SanDisk’s and Toshiba’s responsibility for 50% of Environmental Costs under Section
5.1(a) shall be subject to each of the following limitations (Environmental Costs not excluded
from the one or both Parties’ responsibility under this Section 5.1(b), “Covered
Environmental Costs”):

	 	1.	 	Except as provided in Section 5.2(a), neither Party shall be
responsible for conditions identified in the Y4 Baseline Environmental Report,
including responsibility for any Environmental Costs resulting from, arising out of
or otherwise by virtue of remediation or removal of pre-existing conditions.
Without limiting the foregoing, neither party shall be responsible for remediation
or removal of pre-existing conditions in the area depicted as Area #3 on the
attached Exhibit B or the third-party-owned land adjacent thereto.
However, if remedial measures otherwise taken in accordance with this Agreement
incidentally result in

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	 	 	 	remediation or removal of conditions not resulting from operation of the Y4 Facility
or Other Y4 Facilities, only the Environmental Costs paid for the remedial measures
taken with respect to the Y4 Facility or Other Y4 Facilities, as applicable
(including amounts paid for remedial measures taken with respect to the Y4 Facility
or Other Y4 Facilities that return the Y4 Facility or Other Y4 Facilities to a
condition better than that identified in the Y4 Baseline Environmental Report) shall
constitute Covered Environmental Costs.
	 
	 	2.	 	Neither Party shall be responsible for Environmental Costs to the
extent such Environmental Costs are incurred as a result of the willful misconduct
of employees, agents or representatives of the other Party.
	 
	 	3.	 	Environmental Costs incurred for remediation shall only constitute
Covered Environmental Costs to the extent reasonably necessary to ensure that the
Company fulfills the Prudent Operator Standard. The “Prudent Operator Standard”
means taking all such remedial measures (i) as are required to be in compliance
with all then effective Environmental Laws, (ii) that have been required by a
Governmental Authority or (iii) that a prudent operator of a similar facility would
then take or begin to take to ensure that its continuing operations and facilities
will remain in compliance with then effective Environmental Laws and with
Environmental Laws as they are then scheduled to go into effect or are anticipated
to be changed in the next one [*].
	 
	 	4.	 	No Environmental Costs shall constitute Covered Environmental Costs
with respect to either Party to the extent such Party’s liability limit under
Section 5.5 has been exceeded.

	(c)	 	If the Parties are not able to agree on whether any given Environmental Costs constitute
Covered Environmental Costs (including whether remediation is necessary to fulfill the Prudent
Operator Standard), such dispute shall be resolved by the mediation and arbitration provisions
of Appendix A.

	5.2	 	Toshiba Indemnity. Toshiba shall indemnify SanDisk and its Indemnified Parties from
any environmental costs, expenses or liabilities of SanDisk resulting from, arising out of or
otherwise by virtue of:

	(a)	 	environmental conditions existing at the Yokkaichi Facility (including the Y4 Facility but
excluding conditions from operations of the Y3 Facility) prior to 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)	 	the actions or omissions of Toshiba, its Affiliates or its or their respective employees,
directors, agents or representatives (other than in connection with the operation of the Y4
Facility or Other Y4 Facilities), for which Toshiba shall be solely responsible; provided
however, that Toshiba shall have no indemnification obligation under this Section 5.2(b) to
the extent that any Environmental Costs result from, arise out of or otherwise occur by virtue
of actions or omissions of SanDisk, its Affiliates or its or their respective employees,
directors, agents or representatives, for which SanDisk shall be solely responsible;

	(c)	 	from the operations of the Y4 Facility or Other Y4 Facilities after the FA Termination Date
(unless SanDisk is the Buyer for purposes of Section 5.3, in which case this Section 5.2(c)
shall not apply); or

	(d)	 	environmental conditions existing before Closing at Area #3, to the extent of contractual
rights (including to indemnification), claims or defenses of Toshiba against Yokkaichi City or
other lessors to Toshiba of Area #3 (“Third Party Property Indemnity”) that are
actually enjoyed by Toshiba (and to the extent SanDisk bears its pro rata share in exercising
any such rights, claims or defenses) and further provided that, in the event such Third Party
Property Indemnity is not assignable or otherwise available for the direct benefit of SanDisk,
Toshiba shall exercise reasonable efforts to obtain the benefits of such Third Party Property
Indemnity for SanDisk (with any associated costs of exercising such rights to be borne pro
rata by SanDisk).

	5.3	 	Buyer Indemnity. If either of Toshiba or SanDisk (as “Buyer”) acquires the
interests of the other (as “Seller”) in the Company, the Y4 Facility and Other Y4
Facilities (whether through acquiring its Shares in the Company, by an asset sale and
liquidation or by other means), then, subject to Section 7, Buyer shall indemnify Seller and
its Indemnified Parties from any environmental costs, expenses or liability of Seller
resulting from, arising out of or otherwise by virtue of, operations of the Y4 Facility and
Other Y4 Facilities after the FA Termination Date. However, Buyer shall have no
indemnification obligation under this Section 5.3 to the extent that any Seller environmental
costs, expenses or liabilities result from, arise out of or otherwise by virtue of actions or
omissions of Seller, its Affiliates or its or their respective employees, directors, agents or
representatives.

	5.4	 	Control by Indemnifying Party.

	(a)	 	The indemnifying Party under Section 5.2 or 5.3 shall have the sole right to control the
defense of any claim and the method and scope of remediation with respect to which the
indemnified Party seeks indemnification, provided that the indemnifying Party shall not enter
into any settlement that would materially affect the operations of the indemnified Party at
the Yokkaichi Facility unless the indemnified Party has granted its prior written consent.

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	(b)	 	The Parties shall cooperate in good faith to seek to agree upon the means of joint defense of
any third party claim giving rise to Covered Environmental Costs (with any disagreement to be
resolved by the mediation and arbitration provisions set forth in Appendix A)

	5.5	 	Liability Limit. Neither Party’s aggregate liability for Covered Environmental Costs
or indemnification obligations under Sections 5.1, 5.2 and 5.3 shall exceed the greater of
US$5 million or the aggregate purchase price of Y4 NAND Flash Memory Products by such Party
from the Company during the six years prior to the date of the applicable claim (or in the
case of liability arising after the FA Termination Date, for the six year period immediately
preceding the FA Terminate Date).

	6.	 	Satisfaction of Indemnification Obligations.

	6.1	 	Prompt Payment. Each Party shall promptly pay its 50% share of any Covered
Environmental Costs paid by the Company or by the other Party in excess of its obligation to
bear 50% of the Covered Environmental Costs. In principle, Toshiba and SanDisk shall bear
their respective 50% shares of any given Covered Environmental Costs via adjustments to the
purchase prices they pay Company for Y4 NAND Flash Memory Products, pursuant to the applicable
FA Master Operative Documents. The Parties shall discuss in good faith the means and the
timing of payment of their respective 50% share of Covered Environmental Costs, taking into
account when the Covered Environmental Costs are paid by the Company or by the other Party and
the amount of such Covered Environmental Costs. To the extent the obligations of either Party
will not be timely or fully retired by wafer price increases, the Parties shall directly pay
their respective 50% share of Covered Environmental Costs.

	6.2	 	Action in the Name of the Company. Either Party making a demand for indemnification
or contribution pursuant to this Agreement shall be entitled, notwithstanding anything to the
contrary in the FA Master Agreement or the FA Operating Agreement, to cause the Company to
make such demand, if doing so is appropriate to fulfill the intent of this Section 6 (e.g., if
the Company has borne the Covered Environmental Costs and the claiming Party has already
reimbursed the Company 50% of the same).

	7.	 	Post Termination Environmental Costs and Exit Environmental Report. 

	7.1	 	Environmental Costs Paid Post Termination. Except as otherwise set forth in this
Section 7, the Parties’ obligations under Section 5.1 shall expire as of the FA Termination
Date:

	(a)	 	In respect of Environmental Costs for remediation, to the extent the Exit Environmental
Report (as defined below) identifies contamination at the Y4 Facility or Other Y4 Facilities
and a good faith claim concerning shared responsibility for such remediation costs is made by
one of the Parties before the FA Termination Date, any obligations of the Parties under
Section 5.1(a) (subject to Section 5.1(b)) in respect of remediation of

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	 	 	such contamination shall survive the FA Termination Date, but only for so long and to the
extent the Prudent Operator Standard continues to require remediation in respect of such
contamination.

	(b)	 	In respect of Covered Environmental Costs resulting from a bona fide third party claim, the
Parties obligations under Section 5.1(a) (subject to Section 5.1(b)) shall
survive[*].

	7.2	 	Exit Environmental Report.
	 
	(a)	 	Promptly upon (i) the exercise by either Party of any right under the FA Operating Agreement
and/or the FA Master Agreement to acquire the Shares of the other Party in the Company, to
sell its Shares in the Company to the other Party or to cause the dissolution of the Company,
or (ii) entering into any letter of intent or agreement for the sale of the Y4 Facility, Other
Y4 Facilities or all or substantially all of the assets (leased or owned) of the Company, the
Parties shall engage an environmental consultant from an internationally recognized
environmental investigation firm that has experience in Japan and that is mutually acceptable
to the Parties (the “Exit Consultant”) to conduct and complete Phase I and Phase II
investigations of the Y4 Facility and Other Y4 Facilities as of a date as close as practicable
to but in any event in advance of the FA Termination Date. Toshiba shall facilitate the Exit
Consultant’s access to the Yokkaichi Facility as reasonably necessary to conduct such
investigations.
	 
	(b)	 	The Exit Consultant shall be directed to prepare a draft report based on its Phase I and
Phase II investigations and to deliver the draft report to SanDisk and Toshiba (and if either
so directs, to any environmental consultant either Party has engaged for its own account).
SanDisk and Toshiba, directly and/or through their respective consultants, shall have 60 days
from receipt to comment on the draft report (any such comment shall be delivered both to the
Exit Consultant and the other Party and any consultant it engages for its own account). The
Exit Consultant shall then be directed to issue to the Parties its final report (the “Exit
Environmental Report”), which shall be final and binding on the Parties.
	 
	(c)	 	Covered Environmental Costs arising from the Exit Environmental Report process shall be
payable as provided in Section 6.1.
	 
	(d)	 	Unless all payments due for Covered Environmental Costs in connection with the Exit
Environmental Report process have been made before the FA Termination Date, the Buyer shall be
entitled to withhold from the purchase price payable (or distributable) to

 

			
	*	 	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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	 	 	Seller and place into third
party escrow up to
[*] of such
purchase price (but not to
exceed the balance of
Seller’s liability limit in
Section 5.5), which shall
serve as security for
Seller’s responsibility for
Covered Environmental Costs
determined pursuant to this
Section 7.
	 
	7.3	 	[*]
	 
	8.	 	Miscellaneous.
	 
	8.1	 	Survival. Sections 5, 6, 7 and 8 and Appendix A shall survive the
termination or expiration of this Agreement.
	 
	8.2	 	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.
	 
	8.3	 	Effective Time of Agreement. Notwithstanding the effective date of this Agreement
first written above, SanDisk’s indemnification obligations hereunder shall not become
effective until its Consultant has completed its Phase II soil sampling of the proposed site
of the Y4 Facility. SanDisk shall use its best efforts to cause its Consultant to complete
such sampling on an expedited basis, with a goal of completion on or before June 30, 2006, and
Toshiba shall take all steps necessary to ensure that SanDisk’s Consultant is granted timely
access to the entire proposed site of the Y4 Facility (taking into account measures to avoid
adverse effects to the manufacturing operations of the Yokkaichi Facility) to complete such
Phase II soil sampling within such period.
	 
	8.4	 	Governing Law. This Agreement shall be governed and construed as to all matters
including validity, construction and performance by and under the substantive laws of Japan.
	 
	8.5	 	Dispute Concerning Prudent Operator Standard. Notwithstanding anything to the
contrary in Section 2.5 of Appendix A, if the Parties are not able to agree upon what
application of the Prudent Operator Standard requires with respect to any given proposed
remediation hereunder, at the request of either of them they shall engage a neutral and
independent environmental consultant acceptable to both Parties (the “Independent
Consultant”) to facilitate resolution of such dispute. The Parties (and at the option of
each of them their own environmental consultants) shall meet and discuss the matter with the
Independent Consultant and seek in good faith to resolve the dispute. If the Parties

 

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

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	 	 	are not able to resolve the dispute within 60 days after initiating discussions with the
Independent Consultant, then at any time after such 60 day period either Party may bring an
arbitration claim pursuant to Section 2.5 of Appendix A to resolve the dispute
concerning application of the Prudent Operator Standard.
	 
	8.6	 	Assignment. Neither party hereto 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 hereto (which consent may be withheld in such other party’s
sole discretion), and any such purported transfer without such consent shall be void.

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     IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and delivered as of
the date and year 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	 	 

 

 

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Exhibit A

[*]

      

      

      

      

      

      

      

 

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

 

 

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Exhibit B

[*]

      

      

      

      

      

      

      

      

 

			
	*	 	Indicates that certain information contained
herein has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the
omitted portions.exv10w6

 

EXHIBIT 10.6

FOIA Confidential Treatment Requested

Execution Version

PATENT INDEMNIFICATION AGREEMENT

This PATENT INDEMNIFICATION AGREEMENT, dated and effective 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 [*]and SanDisk together with Toshiba, the “Parties”).

     WHEREAS, Toshiba and SanDisk are parties to that certain Flash Partners II Master Agreement,
dated as of the date hereof (the “Master Agreement”);

     [*]

     WHEREAS, recognizing that the products SanDisk will acquire from the Company will have been
manufactured using Toshiba patents and technology, and recognizing that SanDisk, as an owner of the
equity interests in the Company, will benefit from Toshiba’s making available its patents and
technology to the Company, the Parties have determined to enter into this Agreement, which is
required by the Master Agreement.

     NOW, THEREFORE, the Parties agree as follows:

	1.	 	Indemnification.
	 
	1.1	 	Patent Infringement. With regard to any and all sales of Y4 NAND Flash
Memory Products by the Company to SanDisk (“Company Products”):
	 
	(a)	 	Subject to the terms and conditions listed below, Toshiba agrees to indemnify and
defend SanDisk in any legal proceeding, lawsuit or other judicial action, [*]claims that the
Company Products supplied by the Company infringe any [*] patent(s). With regard to any claim
of patent infringement for which Toshiba has indemnification obligations hereunder, Toshiba’s
obligations are subject to the following conditions:

	 	(i)	 	SanDisk shall notify Toshiba in writing of such claim [*]; 
	 
	 	(ii)	 	SanDisk shall also notify Toshiba, in writing [*];
	 
	 	(iii)	 	SanDisk shall provide Toshiba with notice of any other written communication
indicating potential patent infringement claims against the Company Products [*];
provided, however, SanDisk’s failure to provide such notice shall in no
way constitute a breach of this Agreement by SanDisk nor in any way excuse Toshiba’s
obligations under this Agreement;
	 
	 	(iv)	 	[*], Toshiba shall have the sole and exclusive control of the defense or
settlement

 

			
	*	 	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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	 		 	of such claim, [*]; and
	 
	 	(v)	 	SanDisk shall provide all reasonable assistance in defending such claim.

	(b)	 	Notwithstanding the foregoing, Toshiba shall not be obligated to indemnify or defend
SanDisk in the event that such infringement arises from:

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

	(c)	 	[*]
	 
	(d)	 	[*]
	 
	(e)	 	In addition to the obligations set forth above, should any third party patent claim
result in a temporary or permanent injunction against the manufacture, use, sale, offer for
sale, importation or otherwise disposal of the Company Products by SanDisk, Toshiba shall use
best efforts to undertake one of the following actions:

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

	(f)	 	The total cumulative liability of Toshiba under this Agreement, exclusive of the
remedy set forth in subparagraph (e), above, shall be limited to an amount not to exceed the
greater of (x) [*]or (y) [*].
	 
	1.2	 	Qualifying Claims.
	 
	(a)	 	If either Party receives a notice of a [*] or becomes aware that the Company has
received such a notice, it shall promptly notify the other Party. Promptly following the
notified Party’s receipt of such notice from the notifying Party, the Parties shall meet and
discuss in good faith whether and how [*], in accordance with the principles set forth in
Section 1.2(b).
	 
	(b)	 	In discussing and evaluating each [*], Toshiba and SanDisk shall discuss and agree
upon [*].
	 
	(c)	 	If despite their good faith efforts the Parties are not able to agree upon [*]
pursuant to

 

			
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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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	 	 	Section 1.2(b) for [*], the matter shall be resolved in accordance with the dispute
resolution procedures set forth in the Master Agreement.
	 
	(d)	 	[*]
	 
	1.3	 	[*]
	 
	2.	 	termination
	 
	 	 	This Agreement shall terminate [*], and upon such termination, this
Agreement shall be of no further force and effect, and Toshiba and SanDisk shall thereafter
have no liability hereunder.
	 
	3.	 	miscellaneous 
	 
	3.1	 	Certain Definitions and Interpretive Rules.
	 
	(a)	 	As used herein, the term “Agreement” means this Patent Indemnification
Agreement together with any exhibits, schedules, appendices and attachments hereto.
	 
	(b)	 	Capitalized terms used but not defined in the main body of this Agreement shall have
the respective meanings assigned to them in attached Appendix A. If any capitalized
term used in this Agreement is not defined in either the main body of this Agreement or
Appendix A, it shall have the meaning assigned to it in the Master Agreement.
	 
	(c)	 	The rules of construction and documentary conventions and general terms and
conditions set forth in Appendix A shall apply to this Agreement.
	 
	3.2	 	[*]
	 
	(a)	 	[*]

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

	3.3	 	Survival. Except as otherwise specifically provided in this Agreement, all
covenants, agreements, representations and warranties of the Parties made in or pursuant to
such agreement or instrument shall survive the execution and delivery of such agreement or
instrument and the closing of the transactions contemplated thereby, notwithstanding 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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	 	 	investigation by or on behalf of any party. Further, the provisions set forth in this
Article III shall survive and shall apply with respect to this Agreement following
termination thereof pursuant to Article II hereof.
	 
	3.4	 	Assignment. Neither Party shall transfer, or grant or permit to exist any
Lien (except Permitted Liens) on, 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 each such other Party’s sole discretion), and any such
purported transfer or Lien without such consent shall be void. [*].
	 
	3.5	 	Governing Law. This Agreement shall be governed and construed as to all
matters including validity, construction and performance by and under the substantive laws of
the State of California.

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

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and delivered as of the
date and year 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

[*] 	 
	 

 

			
	*	 	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.

[Signature page to Patent Indemnification Agreement]

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