Mutual Contribution and Environmental Indemnification Agreement – SanDisk Corp. and Toshiba Corp.

1.

Definitions and Interpretation.

1.1

FF Master Agreement. Appendix A to the FF 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. If
any capitalized term used in this Agreement is not defined herein or in Appendix
A, it shall have the meaning assigned to it in the FF Master Agreement.

1.2

Definitions. The following terms used in this Agreement shall have the
following respective meanings:

(a)

“Environmental Costs” means any and all costs, expenses or liability
(including claims by third parties or any Governmental Authority) attributable
to 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 Y5 Facility or Other Y5 Facilities from the Closing until the
FF 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 Y5 Facility and Other Y5 Facilities are and
will (until the FF Termination Date) remain in compliance with then applicable
Environmental Laws.

(b)

“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
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.

(c)

“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.

(d)

“Share” means each of SanDisk Entity153s and Toshiba153s respective
liability for Environmental Costs, which shall be measured by and shared in
proportion to (i) each Party153s Y5 Capacity Ratio (as may be adjusted pursuant to
the FF Master Agreement) within the Y5 Facility and Other Y5 Facilities at the
time of the applicable contamination or release, if determinable, or (ii) if the
time of such contamination or release is not determinable, each of Toshiba153s and
SanDisk153s cumulative Equivalent Lot output from the commencement of production
at the Y5 Facility and Other Y5 Facilities until the date the applicable
contamination or release is discovered.

2.

Environmental Investigations.

2.1

Environmental Consultants. As of the date hereof, the Parties
acknowledge that neither Party has engaged an environmental consultant to
investigate, or prepared or obtained an environmental report with respect to,
the Y5 Facility or Other Y5 Facility (as defined below). Subject to Section 2.2,
each of SanDisk and Toshiba will engage 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 Y5 Facility and other new land to be acquired or leased by Toshiba for
the purpose of the Y5 Facility153s operation (such new land to be acquired or
leased, the “Other Y5 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 Y5 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. To the extent reasonably practicable and subject to
Toshiba153s consent, which shall not be unreasonably withheld, 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, if performed, Phase II
studies at the site of the Y5 Facility (and immediately adjacent thereto) prior
to the start of Y5 Facility operation (scheduled to begin April 2011);
provided, however, that the Parties acknowledge that the
Consultants may not be able to perform such studies with respect to some
portions or all of the Y5 Facility and Other Y5 Facilities (any such portion, an
“Untested Area“), and that access by the Consultants to the proposed site
of the Y5 Facility and Other Y5 Facilities will be only to the extent necessary
to conduct the Phase I and Phase II studies and subject to Toshiba153s prior
consent, which shall not be unreasonably withheld.

2.3

Information from Monitoring Activities. Toshiba shall share, or cause
to be shared, with SanDisk and, upon SanDisk153s 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 Y5 Facility and Other Y5 Facilities on or after the Effective Date and until
the FF Termination Date; provided that if as of the FF Termination Date
any claims have been made against SanDisk with respect to its indemnification
obligations hereunder, on SanDisk153s 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 Y5 Facility and Other Y5 Facilities shall be considered
Confidential Information of the Company and any such information concerning the
Yokkaichi Facility (including the Y5 Facility and Other Y5 Facilities) shall be
considered Confidential Information of Toshiba.

3.

Baseline Environmental Report.

4.

Environmental Compliance.

4.1

Compliance. The Parties confirm their intent that the Y5 Facility and
Other Y5 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 Y5 Facility and Other Y5 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 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 SanDisk153s 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 1425.1(b), each of SanDisk and Toshiba shall:

(1)

be responsible for bearing its Share of Environmental Costs; and

(2)

indemnify, defend and hold harmless the other Party and the Company (and
their respective Indemnified Parties) for its Share of such Environmental Costs.

(b)

Each of SanDisk153s and Toshiba153s responsibility for its Share of Environmental
Costs under Section
1425.1(a)
shall be subject to each of the following limitations (Environmental Costs not
excluded from the one or both Parties153 responsibility under this Section
1425.1(b), “Covered Environmental Costs“):

(1)

Except as provided in Section 5.2(a), neither Party shall be responsible for
conditions identified in the Y5 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.
However, if remedial measures otherwise taken in accordance with this Agreement
incidentally result in remediation or removal of conditions not resulting from
operation of the Y5 Facility or Other Y5 Facilities, only the Environmental
Costs paid for the remedial measures taken with respect to the Y5 Facility or
Other Y5 Facilities, as applicable (including amounts paid for remedial measures
taken with respect to the Y5 Facility or Other Y5 Facilities that return the Y5
Facility or Other Y5 Facilities to a condition better than that identified in
the Y5 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 ****.

(4)

No Environmental Costs shall constitute Covered Environmental Costs with
respect to either Party to the extent such Party153s liability limit under Section
1425.5
has been exceeded.

(c)

If the Parties are not able to agree on whether any given Environmental Costs
constitute Covered Environmental Costs (including, following the completion of
the sixty (60)-day process set forth in Section
1428.5,
as to 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 Y5
Facility or Other Y5 Facilities but excluding conditions from operations of the
Y3 Facility and Y4 Facility) prior to the Closing;

(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 Y5 Facility or Other Y5 Facilities), for
which Toshiba shall be solely responsible; provided however, that
Toshiba shall have no indemnification obligation under this Section
1425.2(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; or

(c)

from the operations of the Y5 Facility or Other Y5 Facilities after the FF
Termination Date (unless SanDisk is the Buyer for purposes of Section
1425.3,
in which case this Section
1425.2(c)
shall not apply).

5.3

Buyer Indemnity. If either of Toshiba or SanDisk (as “Buyer“)
acquires the interests of the other (as “Seller“) in the Company, the Y5
Facility and Other Y5 Facilities (whether through acquiring its FF Interests, by
an asset sale and liquidation or by other means), then, subject to Section
1427,
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 Y5 Facility and Other Y5 Facilities
after the FF Termination Date. However, Buyer shall have no indemnification
obligation under this Section
1425.3
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
1425.2
or
1425.3
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.

(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 Party153s aggregate liability for Covered
Environmental Costs or indemnification obligations under Sections
1425.1,
1425.2
and
1425.3
shall exceed the greater of (a) US$5 million or (b) the aggregate (i) purchase
price of the products purchased by such Party from Flash Forward and (ii)
transfer price of the products produced for such Party at the Y5 Facility (which
for purposes of computing this aggregate shall be deemed to be no less than cost
plus one percent (1%)), during the six years prior to the date of the applicable
claim (or in the case of liability arising after the FF Termination Date, for
the six year period immediately preceding the FF Terminate Date).

6.

Satisfaction of Indemnification Obligations.

6.1

Prompt Payment. Each Party shall promptly pay its Share of any Covered
Environmental Costs paid by the Company or by the other Party in excess of its
obligation to bear the Covered Environmental Costs. In the event that any
Covered Environmental Costs are incurred by the Company or disproportionately by
a Party in excess of its Share, the Company or such Party, as applicable, shall
invoice the other Party or Parties directly for the balance of such Covered
Environmental Costs to the extent of such Party153s Share in accordance with
Section
1425.1(a);
provided, however, that upon the mutual agreement of the
Parties, each Party153s respective Share of Covered Environmental Costs may
otherwise be paid via adjustments to the purchase prices they pay to the Company
for Y5 NAND Flash Memory Products, pursuant to the applicable Master Operative
Documents. The Parties shall discuss in good faith the means and the timing of
payment of their respective Shares 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 Shares 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 FF Master Agreement or the FF
Operating Agreement, to cause the Company to make such demand, if doing so is
appropriate to fulfill the intent of this Section
1426
(e.g., if the Company has borne the Covered Environmental Costs and the
claiming Party has already reimbursed the Company for its Share 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
1427,
the Parties153 obligations under Section
1425.1
shall expire as of the FF Termination Date.

(a)

In respect of Environmental Costs for remediation, to the extent the Exit
Environmental Report (as defined below) identifies contamination at the Y5
Facility or Other Y5 Facilities and a good faith claim concerning shared
responsibility for such remediation costs is made by one of the Parties before
the FF Termination Date, any obligations of the Parties under Section
1425.1(a)
(subject to Section 1425.1(b)) in respect of remediation of such contamination
shall survive the FF 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
1425.1(a)
(subject to Section 1425.1(b)) shall survive ****.

7.2

Exit Environmental Report.

(a)

Promptly upon (i) the exercise by either Party of any right under the FF
Operating Agreement and/or the FF Master Agreement to acquire the FF Interests
of the other Party, to sell its FF Interests 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 Y5 Facility and Other Y5 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 Y5 Facility and Other Y5
Facilities as of a date as close as practicable to but in any event in advance
of the FF Termination Date. Toshiba shall facilitate the Exit Consultant153s
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 sixty (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)

Environmental Costs arising from the Exit Environmental Report process shall
be payable as provided in Article
1425
and Section
1426.1.

(d)

Unless all payments due for Covered Environmental Costs in connection with
the Exit Environmental Report process have been made before the FF Termination
Date, the Buyer shall be entitled to withhold from the purchase price payable
(or distributable) to Seller and place into third party escrow up to **** of
such purchase price (but not to exceed the balance of Seller153s liability limit
in Section
1425.5),
which shall serve as security for Seller153s responsibility for Covered
Environmental Costs determined pursuant to this Section
1427.

7.3

**** [omitted]

8.

Miscellaneous.

8.1

Survival. Sections
1425,
1426,
1427
and
1428
and Appendix A shall survive the termination or expiration of this
Agreement.

8.2

Entire Agreement. This Agreement, together with any 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. This Agreement shall be effective from
the date first written above.

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 or Attribution of
Environmental Costs. Notwithstanding anything to the contrary in Section 2.5
of Appendix A, if the Parties are not able to agree upon (i) what
application of the Prudent Operator Standard requires with respect to any given
proposed remediation hereunder or (ii) the attribution of Hazardous Substances
for purposes of Section
1427.3,
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 are not able to resolve the dispute within
sixty (60) days after initiating discussions with the Independent Consultant,
then at any time after such sixty (60) day period either Party may bring an
arbitration claim pursuant to Section 2.5 of Appendix A to resolve the
dispute.

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 party153s sole discretion),
and any such purported transfer without such consent shall be void.

TOSHIBA CORPORATION

By:

/s/ Kiyoshi Kobayashi

Name:

Kiyoshi Kobayashi

Title:

President and CEO

Semiconductor Company

Corporate Senior Vice President

SANDISK FLASH B.V.

By:

/s/ Sanjay Mehrotra

Name:

Sanjay Mehrotra

Title:

Director