Patent Cross License Agreement - SanDisk Corp. and Sharp Corp.


                         PATENT CROSS LICENSE AGREEMENT
                                     BETWEEN
                    SANDISK CORPORATION AND SHARP CORPORATION


         This agreement  ("Agreement") is made by and among SanDisk Corporation,
a  Delaware  corporation,  having  an office at 140  Caspian  Court,  Sunnyvale,
California  94089,  U.S.A.  (hereinafter  referred to as  "SanDisk"),  and Sharp
Corporation,  a  Japanese  corporation,  having an office at 22-22  Nagaike-Cho,
Abeno-Ku, Osaka 545 Japan ("SHARP").


                                   WITNESSETH

         WHEREAS,  SanDisk and Sharp each own  patents  and patent  applications
covering inventions  pertinent to the design and manufacture of flash memory and
other semiconductor products; and

         WHEREAS,  SanDisk  and  Sharp  are both  engaged  in  their  respective
continuing  programs  of  research  and  development  of  flash  memory  related
technology,  which will result in new  discoveries  and inventions many of which
will become the subject of new patent applications and patents; and

         WHEREAS,  SanDisk  and  Sharp  each  want  to  respect  the  technology
contributions  of the other and want to  increase  their  freedom  to design and
manufacture  their own new products  without  infringing the rights of the other
under any patent or patent application owned or controlled by the other;

         NOW,  THEREFORE,  in consideration of the mutual covenants and promises
contained herein, the parties agree as follows:

         1.       DEFINITIONS.

                  1.1a "Subsidiary" shall mean any corporation, company or other
entity  more  than  fifty  percent  (50%) of whose  outstanding  shares or stock
entitled to vote for the election of  directors  (other than any shares or stock
whose voting rights are subject to restriction) is owned or controlled by either
SanDisk or Sharp, directly or indirectly.

                  1.2 "Effective Date" shall be the date on which this Agreement
is executed by Sharp.

                  1.3  "Integrated   Circuit  Products"  shall  mean  a  unitary
electronic  circuit,  the active  circuit  elements of which are  fabricated  of
silicon  semiconductive  material,  such device  being in the form of a separate
discrete device, or integral with a silicon wafer and severable therefrom.

                  1.3a  "Flash   Memory   Integrated   Circuit"   shall  mean  a
non-volatile  memory  integrated  circuit that is electrically  programmable and
electrically erasable, and consists of (1) flash






memory  cells,  each of which has a floating  gate and utilizes no more than two
different  floating  gate  charge  levels  representing  no more than one bit of
information,  and (2) any on-chip  control,  I/O,  and other  support  circuitry
necessary to the operation of the memory integrated  circuit,  in both wafer and
chip form.

                  1.4  "MLC  Flash  Memory  Integrated  Circuit"  shall  mean  a
non-volatile  memory  integrated  circuit that is electrically  programmable and
electrically erasable, and consists of (1) flash memory cells, each of which has
a floating  gate and  utilizes at least  three  different  floating  gate charge
levels  representing  more  than  one bit of  information,  and (2) any  on-chip
control,  I/O, and other  support  circuitry  necessary to the  operation of the
memory integrated circuit, in both wafer and chip form.

                  1.5 "Flash  Memory  Device"  shall mean a memory  device which
consists   of  one  or  more  Flash   Memory   Integrated   Circuits   with  the
housing/packaging and any supporting means therefor.

                  1.6 "MLC Flash Memory Device" shall mean a memory device which
consists  of  one  or  more  MLC  Flash  Memory  Integrated  Circuits  with  the
housing/packaging and any supporting means therefor.

                  1.7a "Flash Memory  System"  shall mean an integrated  circuit
memory system (including  hardware and/or  software),  which contains (i) one or
more  interconnected  Flash Memory Devices or Flash Memory Integrated  Circuits,
(ii)  in-system  control,   I/O  and  other  support  circuit(s)  that  are  (a)
interconnected  with  the  Flash  Memory  Devices  or  Flash  Memory  Integrated
Circuits,  and (b)  necessary  to the  operation of the memory  system,  with or
without the housing/packaging and supporting means therefor.

                  1.7b  "MLC  Flash  Memory  System"  shall  mean an  integrated
circuit memory system (including  hardware and/or software),  which contains (i)
one or  more  interconnected  MLC  Flash  Memory  Devices  or MLC  Flash  Memory
Integrated  Circuits,  (ii) in-system control,  I/O and other support circuit(s)
that are (a)  interconnected  with the MLC  Flash  Memory  Devices  or MLC Flash
Memory  Integrated  Circuits,  and (b)  necessary to the operation of the memory
system, with or without the housing/packaging and supporting means therefor.

                  1.8  "Triple-poly  Flash  Memory  Device"  shall mean either a
Flash  Memory  Device or a MLC  Flash  Memory  Device in which the Flash  Memory
Integrated Circuit(s) or the MLC Flash Memory Integrated Circuit(s), as the case
may be,  utilizes  poly-to-poly  erase and is  manufactured  on a  semiconductor
fabrication process which utilizes three layers of polysilicon.

                  1.8a  "Triple-Poly  Flash Memory  Product" shall mean either a
Triple-poly  Flash Memory Device,  a Flash Memory System,  or a MLC Flash Memory
System in which Triple-poly Flash Memory Devices are included.

                                      -2-





                  1.8b "Etox Flash Product" shall mean (1) a Flash Memory Device
or a MLC Flash Memory Device which  utilizes poly to  source/substrate  erase or
program;  or (2) a Flash Memory  System or MLC Flash Memory  System in which all
Flash  Memory  Devices   and/or  MLC  Flash  Memory  Devices   utilize  poly  to
source/substrate erase or program.

                  1.9 "Third  Party  Flash  Software"  shall mean  software  (in
either  source code or object code form) (1) which is used  primarily to support
or enhance the  operations of Flash Memory  Devices,  MLC Flash Memory  Devices,
Flash Memory Systems,  or MLC Flash Memory Systems,  (2) which is not created or
authored by  employee(s) of Sharp or Sharp's  Subsidiaries  or of San Disk or of
SanDisk's Subsidiaries, and (3) the copyright ownership of which does not lie in
Sharp or Sharp's Subsidiaries or SanDisk or SanDisk's Subsidiaries.

                  1.9a "Flash  Business"  shall mean those  units,  entities and
assets  within  a  company  whose  primary  activity  or  usage  is  to  design,
manufacture,  or sell Flash  Memory  Devices,  MLC Flash Memory  Devices,  Flash
Memory Systems, or MLC Flash Memory Systems.

                  1.10  "SanDisk  Patents"  shall  mean all  classes or types of
patents,  utility  models and design  patents  (including,  without  limitation,
originals or divisions,  continuations,  continuations-in-part  or reissues), in
all countries or  jurisdictions  of the world now owned or controlled by SanDisk
or acquired by SanDisk  during the term of this  Agreement  which (a) are issued
prior to the  expiration or termination  of this  Agreement,  and (b) except for
consideration  paid to employees,  have no requirement to pay  consideration  to
another for the grant of a license  under this  Agreement,  and (c) apply to the
use or manufacture of Flash Memory Integrated Circuits,  Flash Memory Devices or
Flash Memory Systems.

                  1.11  "Sharp  Patents"  shall  mean  all  classes  or types of
patents,  utility  models and design  patents  (including,  without  limitation,
originals or divisions,  continuations,  continuations-in-part  or reissues), in
all countries or  jurisdictions of the world now owned or controlled by Sharp or
acquired by Sharp during the term of this  Agreement  which (a) are issued prior
to the expiration or termination of this Agreement, (b) except for consideration
paid to employees,  have no requirement to pay  consideration to another for the
grant of a license under this Agreement, and (c) apply to the use or manufacture
of Flash  Memory  Integrated  Circuits,  Flash  Memory  Devices or Flash  Memory
Systems.

                  1.12 "SanDisk Licensed  Products" shall mean any SanDisk Flash
Memory Integrated Circuits,  SanDisk Flash Memory Devices,  SanDisk Flash memory
Systems,  and Third  Party  Flash  Software  distributed  or sold by  SanDisk in
conjunction with a SanDisk Licensed Product, and shall not include any MLC Flash
Memory  Integrated  Circuits,  MLC Flash  Memory  Devices,  or MLC Flash  Memory
Systems.

                  1.13  "Sharp  Licensed  Products"  shall mean any Sharp  Flash
Memory  Integrated  Circuits,  Sharp Flash Memory Devices and Sharp Flash Memory
Systems; and Third Party Flash Software where such Third Party Flash Software is
distributed or sold by Sharp in conjunction  with a Shap Licensed  Product,  and
shall not include any Triple-Poly Flash memory Device or Product,

                                      -3-




MLC Flash Memory  Integrated  Circuits,  MLC Flash  Memory  Devices or MLC Flash
Memory Systems.

                  1.14     "Net Sales" shall mean the following:

                           (A) "Net  Sales" with  respect to any Sharp  Licensed
Products  which  are first  sold in the form of Flash  Memory  Devices  or Flash
Memory Integrated  Circuits as individual items shall mean the invoice price for
said Memory Devices or Flash Memory  Integrated  Circuits billed by the IC Group
of Sharp and/or  Subsidiaries  of Sharp;  except  that,  where such sales are to
another  Sharp  subsidiary,  division  or group,  then Net Sales  shall mean the
higher of the invoice price billed,  or the then current  average  selling price
(ASP) for such products to third party customers of Sharp.

                           (B) "Net  Sales" with  respect to any Sharp  Licensed
Products which are first sold in the form of Flash Memory Systems shall mean the
total  invoice  price of all Flash  Memory  Devices or Flash  Memory  Integrated
Circuits used in such Flash Memory Systems when sold as individual  items by the
IC Group of Sharp or its Subsidiaries to third party customers of Sharp, or when
there are no comparable  sales of the same Flash Memory  Devices or Flash Memory
Integrated  Circuits as individual items, Net Sales shall mean the invoice price
for equivalent Flash Memory Devices or Flash Memory Integrated  Circuits sold as
individual  items by the IC Group  of  Sharp or  Subsidiaries  of Sharp to third
party customers of Sharp.  In case there are no equivalent  Flash Memory Devices
or Flash Memory Integrated  Circuits by reason of the fact that the Flash Memory
System  includes only Flash Memory Devices or Flash Memory  Integrated  Circuits
with a total  capacity of less than the  capacity of the lowest  capacity  Flash
Memory  Integrated  Circuit or Flash Memory Device then being sold by Sharp, Net
Sales of such Flash  Memory  Systems  shall be  calculated  by  multiplying  the
invoice price of the lowest  capacity Flash Memory  Integrated  Circuit or Flash
Memory Device,  whichever is lower,  then being sold to third party customers of
Sharp,  by the fraction A/B, where A is the capacity of the Flash Memory Devices
or Flash Memory Integrated  Circuits included in the Flash Memory System,  and B
is the capacity of the lowest capacity Flash Memory Integrated  Circuit or Flash
Memory Device then being sold by Sharp. In no case, however,  shall Net Sales of
such Flash Memory  Systems  exceed the invoice price of the Flash Memory Systems
themselves.  If the Flash Memory System  includes  Flash Memory Devices or Flash
Memory Integrated  Circuits with a total capacity of less than 1 megabit (Mbit),
then sales of such Flash Memory Systems shall not be included in Net Sales.

                           (C) In either case, the invoice price shall be net of
discounts  actually  granted,  insurance  fees and  packing  and  transportation
charges as invoiced separately to customers, refunds actually paid in connection
with product returns,  and duties and sales taxes actually  incurred and paid by
Sharp and/or Subsidiaries in connection with delivery of such Licensed Products.

                           (D) Notwithstanding the above, once the invoice price
of Flash Memory Devices or Flash Memory  Integrated  Circuits have been included
in the Net Sales under paragraph  1.14(a),  any sales of the Flash Memory System
incorporating  said Flash  Memory  Devices or Flash Memory  Integrated  Circuits
shall not be included in Net Sales under paragraph (B).

                                      -4-





         2.       MUTUAL RELEASES.

                  2.1 SanDisk hereby  releases,  acquits and forever  discharges
Sharp, and only Sharp,  from any and all claims or liability for infringement of
any SanDisk  Patents  arising  prior to the  Effective  Date of this  Agreement,
within the scope of the license granted herein by SanDisk.

                  2.2 Sharp  hereby  releases,  acquits and  forever  discharges
SanDisk, and only SanDisk, from any and all claims or liability for infringement
of any Sharp  Patents  arising prior to the  Effective  Date of this  Agreement,
within the scope of the license granted herein by Sharp.

         3.       GRANT OF LICENSES BY SANDISK.

                  3.1   SanDisk   hereby   grants   to   Sharp    non-exclusive,
non-transferable, worldwide licenses under SanDisk Patents (without the right to
sublicense)  to make,  to have made,  to use, to sell, to offer for sale (either
directly or indirectly), and to import, Sharp Licensed Products.

                  3.2 The  license  grant of  Paragraph  3.1  does not  cover or
extend to Sharp's  manufacture of products for a third party (commonly  referred
to as foundry  activities)  unless such products' design  originates wholly with
Sharp or is owned or controlled wholly by Sharp;  provided,  however,  that this
exclusion  shall not apply to (1) Sharp's  library tools or standard  cells that
Sharp  incorporates into any standard or custom integrated circuit (IC) products
that  Sharp  manufactures  for its  customers,  or (2) any  Sharp  semiconductor
manufacturing  processes which Sharp otherwise  utilizes in manufacturing  Sharp
products of Sharp's own design.

                  3.3 Nothing in these grants to Sharp or otherwise contained in
this  Agreement  shall either  expressly  or  impliedly  give Sharp the right to
license  SanDisk  Patents  to others.  Nor shall the sale of any Sharp  Licensed
Products provide or give rise to an implied  license,  by estoppel or otherwise,
in favor of third parties to any SanDisk Patents,  covering combinations of such
Sharp  Licensed  Products  with any other  products  or  methods  of using  such
combinations, except to the extent that the sale of such Sharp Licensed Products
exhausts the relevant SanDisk Patents.

                  3.4 The releases and licenses granted herein to Sharp shall be
extended to all Sharp  Subsidiaries in existence as of the Effective Date. Sharp
may, at its own  discretion,  extend the licenses  granted  under  Paragraph 3.0
hereof to any Sharp Subsidiary that comes into existence during the term of this
Agreement;  provided, however, that the licenses so extended shall be limited to
the using,  making,  having  made,  selling and offering to sell  (directly  and
indirectly),  and importing Sharp Licensed Products only. The patents of a Sharp
Subsidiary  to which such licenses have been so extended will be included in the
Sharp Patents.  The extension to a Sharp  Subsidiary shall apply only during the
time period when the business  entity meets all  requirements  of a  Subsidiary.
Upon  written  request by SanDisk,  Sharp will give  SanDisk  written  notice to
identify any Sharp Subsidiary to which such a license has been extended.

                                      -5-





         4.       GRANT OF LICENSES BY SHARP.

                  4.1   Sharp   hereby   grants   to   SanDisk    non-exclusive,
non-transferable,  royalty-free, worldwide licenses under Sharp Patents (without
the right to  sublicense)  to make,  to have made,  to use, to sell and offer to
sell (either directly or indirectly), and to import SanDisk Licensed Products.

                  4.2 The  license  grant of  Paragraph  4.1  does not  cover or
extend to SanDisk's manufacture of products for a third party (commonly referred
to as foundry  activities)  unless such products' design  originates wholly with
SanDisk or is owned or controlled  wholly by SanDisk;  provided,  however,  that
this exclusion shall not apply to (1) SanDisk's  library tools or standard cells
that SanDisk  incorporates into any standard or custom  integrated  circuit (IC)
products  that  SanDisk  manufactures  for its  customers,  or (2)  any  SanDisk
semiconductor  manufacturing  processes  which  SanDisk  otherwise  utilizes  in
manufacturing SanDisk products of SanDisk's own design.

                  4.3 Nothing in this grant to SanDisk or otherwise contained in
this  Agreement  shall either  expressly or impliedly  give SanDisk the right to
license Sharp Patents to others. Nor shall sale of any SanDisk Licensed Products
provide or give rise to an implied license,  by estoppel or otherwise,  in favor
of third  parties to any Sharp  Patents  covering  combinations  of such SanDisk
Licensed Products with any other products or methods of using such combinations,
except to the extent that the sale of such SanDisk  Licensed  Products  exhausts
the relevant Sharp Patents.

                  4.4 The releases and licenses  granted herein to SanDisk shall
be extended to all SanDisk  Subsidiaries  in existence as of the Effective Date.
SanDisk may, at its own discretion,  extend the licenses granted under Paragraph
4.0 hereof to any SanDisk  Subsidiary that comes into existence  during the term
of this  agreement;  provided,  however,  that the licenses so extended shall be
limited  to the  using,  making,  having  made,  selling  and  offering  to sell
(directly and indirectly),  and importing  SanDisk  Licensed  Products only. The
patents of a SanDisk  Subsidiary  to which such  licenses  have been so extended
will be included in the SanDisk Patents.  The extension to a SanDisk  Subsidiary
shall  apply only  during the time period  when the  business  entity  meets all
requirements of a Subsidiary.  Upon written request by Sharp,  SanDisk will give
Sharp written notice to identify any SanDisk  Subsidiary to which such a license
has been extended.

                  4.5 Sharp shall not assert,  directly  or  indirectly,  in any
manner or in any forum,  any  patents or patent  claims  against any SanDisk MLC
Flash Memory  Device or SanDisk MLC Flash Memory  System during the term of this
Agreement,  until such time as Sharp makes commercial sales of its own MLC Flash
Memory Devices and/or Systems.
Sharp shall give SanDisk notice of such sales.

         5.       PAYMENTS.

                  5.1 As further  consideration  for the  licenses  and releases
granted to Sharp herein,  Sharp shall pay to SanDisk,  unless this  Agreement is
sooner terminated by Sharp pursuant to paragraph 7.4, an initial  non-refundable
License  Fee of U.S.  *, and  thereafter,  royalties  of U.S.  * to be earned as
follows:

                                      -6-
*Confidential treatement requested.




       (1)      U.S. * for the period from the Effective Date to March 31, 1997
       (2)      U.S. * for the period from April 1, 1997 to September 30, 1997
       (3)      U.S. * for the period from October 1, 1997 to March 31, 1998

Payment of the sums due under this  paragraph  5.1 shall be in  accordance  with
paragraph 5.2.

Royalties  for  the  balance  of the  term of this  Agreement  shall  be paid in
accordance with paragraph 5.2a.

                  5.2 Sharp shall make payments of the license fee and royalties
due in accordance with paragraph 5.1 as follows:

        (1)      U.S. * on or before December 27, 1996
        (2)      U.S. * on or before April 30, 1997
        (3)      U.S. * on or before October 30, 1997
        (4)      U.S. * on or before April 30, 1998


                   5.2a Sharp shall pay to SanDisk  royalties on  worldwide  Net
Sales of all Sharp Licensed Products,  exclusive of Sharp Licensed Products sold
to Intel  Corporation  and/or  SanDisk,  from and  after  April 1,  1998 for the
balance  of the  term of this  agreement,  calculated  on a  quarterly  basis in
accordance with the percentage royalty set forth on the following schedule:

   (1) For the period from April 1, 1998 to March 31, 1999, * of net sales
   (2) For the period from April 1, 1999 to March 31, 2000, * of net sales
   (3) For the period from April 1, 2000 to March 31, 2001, * of net sales, and;
   (4) For the period from April 1, 2001 to March 31, 2002, * of net sales.

                   5.2b  Starting  April 1, 1998,  Sharp agrees to make payments
twice a year  for  royalties  earned  in the  two  previous  calendar  quarters.
Payments  will be made (1) on or before  October 30 for quarters  ending June 30
and September 30; (2) on or before April 30 for quarters  ending December 31 and
March 31.  Royalties shall accrue upon the first sale,  transfer or lease of any
Sharp Licensed Product.

                   5.3 All  payments  by  Sharp  hereunder  shall be made net of
applicable  Japanese  withholding  taxes. All payments shall be in U.S. dollars,
wire  transferred to SanDisk in accordance  with the  instructions  set forth on
Exhibit  A.  SanDisk  shall  bear all taxes  imposed  on it with  respect to the
payments  under  this  Section,  provided,  however,  that  if  so  required  by
applicable  law,  Sharp  shall  withhold  the  amount  of  taxes  levied  by the
Government of Japan on payments to be made by Sharp pursuant to this  Agreement,
and shall promptly make payment of the withheld  amount to the  appropriate  tax
authorities of the  Government of Japan and shall  transmit to SanDisk  official
tax  receipts  or other  evidence  issued by said  appropriate  tax  authorities
sufficient to enable  SanDisk to support a claim for United States tax credit in
respect to such withheld taxes so paid by Sharp.

                                      -7-
* Confidential treatement requested.




                  5.4 Starting on or before July 30, 1998,  Sharp shall  provide
to SanDisk a statement of quarterly  worldwide sales of Sharp Licensed  Products
within 30 days of the end of each calendar quarter. SanDisk shall have the right
to have an independent third party accounting firm audit, at SanDisk's  expense,
Sharp's  compliance with this section 5.0, upon reasonable  notice to Sharp. The
auditor  will  maintain  in  confidence  any cost,  margin,  or other  financial
information obtained during the course of the audit, and shall not disclose such
information  to SanDisk or any third party.  The auditor may only notify SanDisk
whether or not Sharp is in  compliance  with this section 5.0, and, if not, what
the correct  royalties  should have been.  Such audit shall be conducted no more
than once a year.  Sharp shall maintain  appropriate  records for one year after
the end of each accounting  year. Sharp shall promptly remedy any failure to pay
the correct  royalty.  Reimbursement  will be made for any  overpayment.  To the
extent an exchange  rate between  Japanese yen and U.S.  dollars is required for
any obligation  hereunder,  the rate used shall be the exchange rate on the last
business day of the quarterly  statement required herein which covers the period
in which the obligation is due.

         6.       COOPERATION.

                  6.1 At any  time  during  the term of this  agreement,  at the
request of either party,  the parties shall meet and negotiate in good faith for
a patent cross-license covering *. The value of any * patents issued at the time
of the * negotiations shall be taken into consideration in calculating the terms
of the *.  However,  neither  party  shall be  obligated  to enter  into  such a
license.

                  6.2 If at any time during the term of this agreement * desires
to  enter  into  an *  relationship  with * for  the * and * to * of  certain  *
products,  then * shall so inform * and the parties  shall meet and negotiate in
good faith such an arrangement;  provided,  however, that neither party shall be
obligated to enter into such an agreement.

         7.       EFFECTIVE DATE, TERM AND TERMINATION.

                  7.1 This  Agreement  shall become  effective on the  Effective
Date,  and shall  continue in effect,  unless  sooner  terminated  as  elsewhere
provided in this Agreement,  through March 31, 2002, expiring at the end of such
day.

                  7.2a If either party hereto commits a material  breach of this
Agreement  and does not correct such breach  within  forty-five  (45) days after
written notice complaining thereof is given to such party, this Agreement may be
terminated  forthwith  by written  notice to that  effect  from the  complaining
party.

                  7.2b  Either  party may  terminate  this  Agreement  by giving
written notice of termination to the other at any time upon or after:

                                      -8-
* Confidential treatement requested.




                           (1) the filing by the other  party of a  petition  in
                               bankruptcy or insolvency;

                           (2) any adjudication that the other party is bankrupt
                               or insolvent;

                           (3) the filing by the other party of any  petition or
                               answer seeking  reorganization,  readjustment  or
                               arrangement   of  its  business   under  any  law
                               relating to bankruptcy or insolvency;

                           (4) the   appointment   of  a  receiver  for  all  or
                               substantially  all of the  property  of the other
                               party;

                           (5) the making by the other  party of any  assignment
                               for the benefit of creditors;

                           (6) the   institution  of  any  proceedings  for  the
                               liquidation  or winding  up of the other  party's
                               business or for the  termination of its corporate
                               charter.

                  This Agreement shall  terminate on the forty-fifth  (45th) day
after such notice of termination is given.

                  7.3a If this  Agreement  is  terminated  pursuant to Paragraph
7.2(a),  the licenses granted to the defaulting party and its Subsidiaries shall
terminate  forthwith,  but the licenses granted the non-defaulting party and its
Subsidiaries  shall survive such termination for the balance of the term of this
Agreement.  If this Agreement is terminated  pursuant to Paragraph  7.2(b),  the
licenses granted by the non-terminating  party shall survive the termination for
the balance of the term of this Agreement. Regardless of the date of termination
pursuant to Paragraph  7.2(b),  and to the extent that licenses granted to Sharp
herein survive such  termination,  the payments owing by Sharp under  Paragraphs
5.1, 5.2,  5.2a, and 5.2b shall be made as scheduled to SanDisk or its successor
company.

                  7.3b In the event  that  SanDisk is  acquired  by or is merged
into a third  party  company,  or in the event  that  SanDisk  transfers  all or
substantially  all its Flash Business to such third party company,  the licenses
granted by Sharp to SanDisk under Paragraph 4.0 hereof may be transferred to the
combined company; provided,  however, that (a) the licenses so transferred shall
become effective only from the date of such merger,  acquisition, or transfer of
the Flash Business,  and (b) the licenses so transferred shall be limited to the
using,  making,   having  made,  selling  and  offering  to  sell  (directly  or
indirectly), and importing SanDisk Licensed Products only.

                  7.3c In the event that Sharp is  acquired by or is merged into
a third party company, or in the event that Sharp transfers all or substantially
all its Flash  Business to such third party  company,  the  licenses  granted by
SanDisk to Sharp under  Paragraph 3.0 hereof may be  transferred to the combined
company;  provided,  however,  that (a) the licenses so transferred shall become
effective  only from the date of such  merger,  acquisition,  or transfer of the
Flash Business, and (b) the licenses

                                      -9-




so transferred shall be limited to the using,  making,  having made, selling and
offereing  to sell  (directly  or  indirectly),  and  importing  Sharp  Licensed
Products only.


                  7.4  Upon  the  expiration  of this  Agreement,  the  licenses
granted  pursuant to this Agreement by one party hereto and its  Subsidiaries to
the other  party  hereto and its  Subsidiaries  under  SanDisk  Patents or Sharp
Patents,  as the case may be, shall terminate.  Sharp shall also have the option
to  terminate  this  Agreement  at any time  prior to March  31,  1998 by giving
written notice of  termination to SanDisk prior to that date.  Upon such notice,
this Agreement and all licenses and releases  thereunder shall terminate.  Sharp
shall remain  obligated to pay  royalties at the rate set forth in paragraph 5.1
pro-rated up through the date of termination.

                  7.5 At any time after April 1, 2001, either party may initiate
negotiations  for a renewal of the cross license  agreement beyond the March 31,
2002  expiration  date.  The royalty base for the renewed  cross license will be
reviewed in case  SanDisk's  applicable  Flash patent  applications  are finally
rejected by the Japanese Patent Office as of March 30, 2002.

         8.       MISCELLANEOUS PROVISIONS.

                  8.1 Each of the parties hereto represents and warrants that it
has the right to grant the other the licenses granted hereunder.

                  8.2 Nothing contained in this Agreement shall be construed as:

                           (a) a  warranty  or  representation  by  any  of  the
parties to this  Agreement  as to the  validity or scope of any class or type of
patent, utility model and/or design patent; or

                           (b)   a   warranty   or   representation   that   any
manufacture,  sale,  lease,  use  or  other  disposition  of  Licensed  Products
hereunder  will be free from  infringement  of patents,  utility  models  and/or
design patents other than those under which licenses have been granted; or

                           (c) an  agreement  to bring or  prosecute  actions or
suits against third parties for infringement or conferring any right to bring or
prosecute actions or suits against third parties for infringement; or

                           (d)  conferring  any  right  to use  in  advertising,
publicity, or otherwise, any trademark, trade name or names, or any contraction,
abbreviation or simulation thereof, of either party; or

                           (e) conferring by implication, estoppel or otherwise,
upon any party licensed hereunder, any license or other right under any class or
type of patent,  utility  model or design  patent except the licenses and rights
expressly granted hereunder; or

                           (f) conferring by implication, estoppel or otherwise,
upon any  party  licensed  hereunder,  any  license  or other  right  under  any
copyright, maskwork, or trade secret right; or

                                      -10-




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

                  8.3 This Agreement is personal to the parties,  and, except as
set forth in paragraph  7.3b and 7.3c,  the Agreement or any right or obligation
hereunder, is not assignable, whether in conjunction with a change in ownership,
or the  sale or  transfer  of the  whole or any part of a  party=s  business  or
assets, either voluntarily, by operation of law, or otherwise, without the prior
written  consent of the other party.  Any such purported  assignment or transfer
shall be null and void. Assignment by either party of any of its patents, or the
applications thereof, which qualify as Licensed Patents as defined herein, shall
not affect the license rights acquired hereunder to such patent(s), and any such
assignment shall be subject to the continuing license rights of the other party.

                  8.4 All notices  required or permitted  to be given  hereunder
shall be in writing and shall be valid and  sufficient  if dispatched by prepaid
air express or by registered  airmail,  postage  prepaid,  in any post office in
Japan or in the United States, as the case may be, addressed as follows:

                           If to SanDisk:

                           Ms. Cindy Burgdorf
                           Senior Vice President and CFO
                           SanDisk Corporation
                           140 Caspian Court
                           Sunnyvale, California 94089
                                   USA

                           If to Sharp:

                           Division General Manager
                           Intellectual Property Division
                           Law Group
                           Sharp Corporation
                           22-22 Nagaike-Cho, Abeno-Ku
                           Osaka 545
                           JAPAN

                  Either party may give  written  notice of as change of address
and, after notice of such change has been received,  any notice or request shall
thereafter be given to such party as above provided at such changed address.

                  8.5 This Agreement  embodies the entire  understanding  of the
parties  with  respect  to the  subject  matter  hereof,  and  merges  all prior
discussions  between  them,  and  neither of the  parties  shall be bound by any
conditions,  definitions,  warranties,  understandings or  representations  with
respect to the subject matter hereof other than as expressly provided herein. No
oral  explanation  or oral  information  by either  party hereto shall alter the
meaning or interpretation of this Agreement. No

                                      -11-




modification,  alteration,  addition  or  change in the  terms  hereof  shall be
binding on either  party  unless  reduced to writing  and duly  executed  by the
parties.

                  8.6 This Agreement and matters  connected with the performance
thereof shall be construed, interpreted, applied and governed in all respects in
accordance  with the laws of the  United  States  of  America  and the  State of
California.

                  8.7 Both parties agree that the content of this Agreement will
not be  published  or  disclosed  to any third party  without the other  party=s
written  permission  except  as  required  by  law or as  may  be  required  for
reasonable auditing purposes or Security and Exchange Commission disclosure. The
parties shall jointly publish the press release  attached hereto as Exhibit B on
a mutually agreed date.

                  8.8  Anything  contained  in this  Agreement  to the  contrary
notwithstanding,  the obligations of the parties hereto and of the  Subsidiaries
of the parties  shall be subject to all laws,  present and future and  including
export control laws and regulations,  of any government having jurisdiction over
the  parties  hereto  or  the  Subsidiaries  of  the  parties,  and  to  orders,
regulations,  directions  or requests of any such  government.  Each party shall
undertake to comply with and be solely  responsible for complying with such laws
applicable to such party.  The parties  hereto shall be excused from any failure
to perform any obligation hereunder to the extent such failure is caused by war,
acts of public enemies, strikes or other labor disturbances, fires, floods, acts
of God,  or any  causes of like or  different  kind  beyond  the  control of the
parties.

                  8.9 All disputes  arising  directly under the express terms of
this Agreement  shall be resolved as follows:  First,  the senior  management of
both  parties  shall meet to attempt to resolve such  disputes.  If the disputes
cannot be resolved  by the senior  management,  either  party may make a written
demand for formal  dispute  resolution.  Within  thirty days after such  written
notification,  the parties shall meet for one day with an impartial mediator and
consider  dispute  resolution   alternatives   other  than  litigation.   If  an
alternative  method of dispute  resolution is not agreed upon within thirty days
after the one day mediation, either party may begin litigation proceedings.

                                      -12-






         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the date below written.


FOR SHARP CORPORATION                      FOR SANDISK CORPORATION


By:    /s/ Atsushi Asada                   By: /s/ Eli Harari
   --------------------------------           -----------------------------
       Printed Name Atsushi Asada              Printed Name Eli Harari
       
       Corporate Senior Executive
Title: Vice President                      Title:   President & CEO
      -----------------------------              --------------------------

Date:    December 24, 1996                 Date:    December 16, 1996
      -----------------------------              --------------------------




                                      -13-




                                    EXHIBIT A

                                  WIRE TRANSFER
                             REMITTANCE INFORMATION
***************************************************************************

         ALL CHARGES WILL BE ABSORBED BY REMITTER.


         Bank:                      UNION BANK
                                    99 Almaden Blvd.
                                    San Jose, CA  95113

         Bank Swift #:              UBLAUS66

         Account Name:              SANDISK CORPORATION

         Account #:                 6450147581

         Bank ABA#:                 122000496

********************************************************************************








                                      -14-




                                    EXHIBIT B



CONTACT: Cindy Burgdorf                                      NOT FOR RELEASE
         SanDisk Corporation                                 UNTIL DEC XX, 1996



                       SHARP AND SANDISK SIGN FLASH PATENT

                            CROSS-LICENSING AGREEMENT


         SUNNYVALE,   CA,  Dec.  XX,  1996  --  Sharp  Corporation  and  SanDisk
Corporation   (NASDAQ:   SNDK)   today   announced   that  they  have  signed  a
cross-licensing agreement for flash memory related patents.

         Under the  agreement,  Sharp and SanDisk  have  licensed  each  other's
patents  covering the design and  manufacture of flash memory  products,  giving
both  companies  worldwide  rights to use those  patents.  Specific terms of the
agreement  are  confidential  but SanDisk will receive a license fee and royalty
payments from Sharp.

         __________________________  (Sharp  to  supply  the name and title of a
Sharp executive and provide a quote.)



         Eli  Harari,  SanDisk  CEO and  president,  said,  "This is a long term
agreement that acknowledges the significant  flash memory  contributions of both
Sharp and SanDisk.  It will allow both  companies to continue  developing  their
respective flash technologies and to compete freely in the rapidly growing flash
marketplace.  It is also our hope  that  this  agreement  will open the door for
future mutual flash memory business cooperation between Sharp and SanDisk."

         ____________________________  (Sharp to  provide  paragraph  describing
Sharp.)

         SanDisk     Corporation     designs,     manufactures    and    markets
industry-standard,  solid-state  data,  image and audio storage  products  using
proprietary,  high density flash memory and controller  technology.  SanDisk has
strategic  alliances with Seagate Technology,  Matsushita  Electronic Corp., NEC
Corp. and LG Semicon.  Seagate holds a 25 percent  equity stake in SanDisk.  The
company is based in Sunnyvale, CA.

                                      -15-