EXHIBIT 10.4
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WAFER SUPPLY AGREEMENT
This Wafer Supply Agreement (the "Agreement") is made and entered into
as of January 14, 1997 (the "Effective Date"), by and between Mitsubishi
Electric Corporation, a Japanese corporation having its principal place of
business at 0-0-0, Xxxxxxxxxx, Xxxxxxx-Xx, Xxxxx 000 Xxxxx ("MELCO"), and
NeoMagic Japan K.K., a Japanese corporation with offices at 0-00, Xxxxxxxxx 0-
xxxxx, Xxxxxxxxx-xxx, Xxxxx, Xxxxx ("NeoMagic-J"), acting as the agent of
NeoMagic International Corporation, a Cayman corporation.
RECITALS
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WHEREAS, NeoMagic-J and ITS affiliated companies (NeoMagic
International Corporation and NeoMagic Corporation, hereinafter referred to as
"Associated Companies") are in the business of designing and selling integrated
circuits.
WHEREAS, MELCO is in the business of, among other things, developing,
manufacturing and selling integrated circuits, a corporation organized under
the laws of Japan, wishes to manufacture for NeoMagic-J integrated circuits
designed by NeoMagic, INTO WHICH dynamic random access memory ("DRAM") MODULES
designed by MELCO ARE INCORPORATED.
NOW, THEREFORE, in consideration of the mutual promises and
obligations herein, the parties agree as follows:
1. DEFINITIONS
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1.1 "Process" shall mean the MELCO wafer manufacturing process
identified on Appendix A to this Agreement. Any additional MELCO wafer
manufacturing processes to be included within the scope of this Agreement shall
be specifically agreed to in writing by the parties and added to Appendix A.
1.2 "Device" shall mean each integrated circuit device on a Wafer
which SHALL BE MANUFACTURED BY MELCO AND purchased by NeoMagic-J under this
Agreement. The first of A SERIES OF SUCH DEVICES is designated by NeoMagic-J as
"NM-2070".
1.3 "DRAM Memory Module" shall mean each DRAM memory array MELCO
shall design for NeoMagic-J or its Associated Companies and incorporated in one
or more Devices.
[*] Confidential Treatment Requested
1.4 "Mitsubishi Proprietary Technology" shall mean any existing
technology, know-how, process (whether or not equivalent to the Process) and
materials owned or CONTROLLED by MELCO as of the Effective Date, and all ideas,
inventions, creations, works, processes, designs, methods, technology, know-how
and materials (whether or not patentable, copyrightable, registrable as a mask
work or protectable as a trade secret or trademark) which are developed and
discovered by MELCO DURING the work performed under this Agreement.
1.5 "NeoMagic-J Proprietary Technology" shall mean any existing
technology, know-how, process, design, schematic and materials owned or
CONTROLLED by NeoMagic-J or its Associated Companies as of the Effective Date,
and all ideas, inventions, creations, works, processes, designs, methods,
technology, know-how and materials (whether or not patentable copyrightable,
registrable as a mask work or protectable as a trade secret or trademark) which
are developed or discovered by NeoMagic-J or its Associated Companies DURING the
work performed under this Agreement.
1.6 "Confidential Information" shall mean any information, including
but not limited to technical information, data base, specifications and
supporting documents, transferred by one party to the other party, either
visually, orally, in writing or in machine-readable format, as well as all masks
or reticules generated by or on behalf of one party for the other party;
provided that all such information is identified "Confidential" or
"Proprietary," or, if visual or oral, is identified as confidential or
proprietary at the time of disclosure and confirmed in writing within seven (7)
days thereafter. CONFIDENTIAL Information also shall include such information
disclosed to or by the Associated Companies. CONFIDENTIAL Information does not
include information generally available to the public, information which is
independently developed or known by the receiving party or an affiliated company
without reference to another party's PROPRIETARY INFORMATION, information
rightfully received from a third party without violation of any confidentiality
obligations under this Agreement, information which is authorized in writing for
release by the disclosing party or information which is released pursuant to
court of governmental order.
1.7 "Purchase Order" shall have the meaning given in Section 4.1 of
this Agreement.
1.8 "Wafer" shall mean a silicon wafer which embodies Devices.
1.9 "Wafer Lot" shall mean 25 Wafers; provided that, this number may
be changed by written Agreement of the parties.
1.10 "Yield" shall mean electrically good DRAM Memory Modules in dice
divided by the number of full die locations on the Wafer (i.e., excluding
locations which are not complete due to the curved edge of the Wafer).
2. TERM
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The term of this Agreement shall commence as of the Effective Date and
shall continue for five (5) years. Such term may be extended on a year-to-year
basis if the parties specifically agree in writing at least nine (9) months
prior to the expiration of the then-current term.
3. FORECASTS
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3.1 Twelve-Month Rolling Forecasts. By the 15th day of each month,
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NeoMagic-J shall provide to MELCO, in a method agreed on by both parties a
rolling forecast ("Forecast") of the number of Wafers which NeoMagic-J intends
to purchase during the next twelve (12) months. The Forecast shall show
deliveries of wafer quantity, deliveries expected to be made by MELCO each
month. The parties shall meet quarterly to review matters related to Forecasts
and capacity under this Agreement. At each quarterly meeting, the parties shall
agree in writing on the Forecasts of the number of Wafers NeoMagic-J intends to
purchase and MELCO intends to sell during the next six (6) months commencing the
first day of the calendar quarter following such quarterly meeting.
Notwithstanding anything to the contrary in this Agreement, no Forecast, or any
part thereof, shall be binding on MELCO or NeoMagic-J except that MELCO agrees
to supply to NeoMagic-J the number of Wafers specified in each Forecast for the
two quarters following such Forecast.
3.2 Required Orders. Purchases for month four (4) of a Forecast
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shall be confirmed by firm purchase orders placed by NeoMagic-J no later than
the last week of the fifth (5th) preceding month. For example, if NeoMagic-J
submits a Forecast on April 15, 1996, for Wafer quantities which have been
agreed to by MELCO, then a purchase order shall be placed before May 1, 1996 for
shipments to be started 15 actual workweeks after the placement of the purchase
order.
3.3 Limited Quantity Adjustments.
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(a) Order quantities for the first four (4) months of any purchase
order are not subject to adjustment without MELCO's prior written consent.
(b) NeoMagic-J may increase or decrease Forecast quantities for the
fifth and sixth calendar months of a Forecast, as compared to quantities in the
prior Forecast for the same three calendar months, by no more than minus ten
percent (-10%) or plus fifteen percent (+15%). In the event NeoMagic-J
increases or decreases Forecast quantities in the manner described in the
previous sentence, it will place a purchase order, according to Section 3.2, for
adjusted quantities to be delivered during the fifth month.
For example, if NeoMagic-J submits a Forecast in December 1995
estimating Product purchases of 3,000 Wafers in each of April, May and June of
1996, which quantities have been agreed to by MELCO, then the Forecast submitted
in January 1996 may increase estimated Product purchases for May and June up to
quantity of 3,450 Wafers (i.e., 115% of 3,000) or down to a quantity of 2,700
Wafers (i.e., 90% of 3,000). In such event, NeoMagic-J shall place purchase
orders no later than January 5, 1996 for Wafers to be shipped in May, and the
number of Wafers subject to such purchase orders shall not be less than 2,700
nor more than 3,450.
(c) NeoMagic-J may increase or decrease the forecasted quantities for
the seventh, eighth and ninth calendar months of a Forecast, as compared to
quantities in the prior Forecast for the same three (3) calendar months, by up
to thirty percent (30%).
For example, if NeoMagic-J submits a Forecast in December 1995
estimating Product purchases of 3,000 Wafers in each of July, August and
September of 1996, which quantities have been agreed to by MELCO, then the
Forecast submitted in January 1996 may increase estimated purchases for each of
July, August and September to as much as 3,900 (130% of 3,000) but to not less
than 2,100 (70% of 3,000).
(d) Forecasted quantities for the tenth, eleventh and twelfth months
following the date of a Forecast shall be based on NeoMagic-J's best estimate
made in good faith and may be revised up or down in the following monthly
Forecast.
(e) MELCO shall arrange for MELCO to make commercially reasonable
efforts to allocate and reserve Wafer production capacity sufficient to supply
the adjustments to the agreed-upon Forecast quantities as described in this
Section 3.3(BCD).
4. PURCHASE ORDERS
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4.1 Definition. "Purchase Order" shall mean the purchase order OF
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NeoMagic-J (including A PURCHASE ORDER ISSUED BY a third party approved by
NeoMagic-J and MELCO ON BEHALF OF NEOMAGIC-J), whether provided in writing or
sent by electronic means, and any documents incorporated therein by reference.
4.2 Printed Terms. Each individual Purchase Order shall be subject
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to the terms of this Agreement. The parties acknowledge that any printed terms
and conditions on Purchase Order or MELCO's Customer Acknowledgment shall be
null and void, and neither party shall be bound by such terms and conditions.
4.3 Minimum Information. All Purchase Orders shall at a minimum
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contain the following information: (i) reference to this Agreement; (ii)
identification of each Device by proper name, Wafer quantities and price; (iii)
shipping instructions and destination; (iv) requested shipment date; and (v) the
method of payment described in Section 6.2 of this Agreement.
4.4 Order Acceptance. Subject to Section 6.2 of this Agreement,
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MELCO shall accept all Purchase Orders which are consistent in quantities with
Forecasts issued and agreed upon by MELCO under this Agreement. MELCO shall
deliver a written acknowledgment of each Purchase Order (or acceptance or
rejection, if the quantity is not consistent with the applicable Forecast or the
Purchase Order is not consistent with the terms of this Agreement) within four
(4) working days after receipt of the Purchase Order.
4.5 Delivery Information. MELCO will provide NeoMagic-J with a
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monthly shipment plan, specifying shipments for each week in the month, for the
coming two (2) months, and another monthly shipment plan, for the coming
three/four (3/4) months, at the beginning of each month.
5. ORDER CANCELLATION.
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Purchase orders accepted by MELCO may be canceled only if NeoMagic-J
agrees to pay MELCO, subject to all the terms of this Section 5, the cost of
work-in-progress for the Wafers which are the subject of the cancellation,
according to the following schedule:
(a) Ten percent (10%) of the Wafer purchase price if the notice of
cancellation is received by MELCO during the period from MELCO's acceptance of
the purchase Order until the commencement of the field process of the
manufacturing; provided, however, that there will be no cancellation fee if
NeoMagic-J substitutes another product using the same Process or MELCO can find
another purchaser (internal demand or external demand) of a similar amount of
wafers to be fabricated using the same Process. MELCO agrees to use its best
efforts to find such a purchaser;
(b) Forty percent (40%) of the Wafer purchase price if the notice of
cancellation is received by MELCO during the period after the commencement of
the field process until commencement of the channel doping process;
(c) Seventy percent (70%) of the Wafer purchase price if the notice of
cancellation is received by MELCO during the period from commencement of the
channel doping process until commencement of the Metal 1 process;
(d) Ninety percent (90%) of the Wafer purchase price if the notice of
cancellation is received by MELCO following the commencement of Metal 1 process
and before Wafer testing; and
(e) One hundred percent (100%) of the Wafer purchase price if the
notice of cancellation is received by MELCO following the commencement of Wafer
testing.
MELCO will invoice NeoMagic-J for such amount, and NeoMagic-J shall pay such
invoices within 60 days from the date of receipt. In all events, however,
certain Wafer quantity adjustments (delays in the delivery date and increase of
quantity) may be discussed between the parties on a case-by-case
basis, but such adjustments shall only be made if agreed to in writing by MELCO,
which Agreement shall not be withheld unreasonably.
MELCO will provide work-in-progress ("WIP") reports, that include
mutually agreed upon information on a periodic basis that the parties agree to
negotiate in good faith but that is consistent with reported cycle times.
Cancellation charges will be based on the latest WIP report with movement
updates to the date of the cancellation notice.
6. PRICING AND PAYMENT
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6.1 Price Calculation Generally. Wafer purchase prices shall be
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determined and calculated in Japanese yen. The parties shall meet quarterly to
set the prices to be charged in the next quarter.
6.2 Payment Obligations. NeoMagic-J will provide for mutually
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acceptable credit terms.
6.3 Payment Terms. MELCO shall invoice a mutually agreed upon
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creditor ("Creditor") upon delivery of the Wafers to the specified FOB location.
The Creditor shall then pay MELCO the net purchase price for Wafers in Japanese
yen within seventy (70) days after the delivery of the Wafers. Past due
invoices of MELCO shall bear interest at the rate of 0.75% per month, but not in
excess of the maximum lawful rate, until paid in full. If the due date of an
invoice is not a business day, the Creditor shall pay MELCO on the next business
day following such due date.
7. MASKS AND RELATED CHARGES
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7.1 Generally. NeoMagic-J shall supply MELCO at NeoMagic-J's
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expense, with set(s) of masks for the manufacture of each Device. NeoMagic-J or
its Associated Companies retains sole ownership of all mask work rights, any
other intellectual property related to such masks, and the masks themselves, and
MELCO shall utilize each mask set provided or created pursuant to this Agreement
solely to manufacture the Wafers for NeoMagic-J or its Associated Companies.
7.2 Charges for Additional Masks. Mask charges in addition to those
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described in Section 7.1 of this Agreement, if any, will be paid to Dai Nippon
Corporation or a mutually agreed upon alternate source as follows:
(a) In the event of Yield problems related to the Process or DRAM
Memory Module's design, MELCO shall pay the charges.
(b) In the event of problems related to layout or Device logic design,
excluding the DRAM Memory Module, NeoMagic-J shall pay charges.
(c) In the event of indeterminable Yield problems or Yield problems
attributable to both DRAM Memory Module and Device design, MELCO and NeoMagic-J
shall each pay half of the additional mask charges.
(d) When the Yield problem is discovered, the party responsible for
the problem as set forth above shall pay the mask charges.
8. QUALITY
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8.1 Cooperation. The parties shall work together to improve Yield,
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quality and reliability of the Wafers.
8.2 Destroy all non-conforming Chips. NeoMagic-J shall ensure that,
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promptly following dicing, NeoMagic-J or its assembler shall destroy all non-
confirming Chips. Upon MELCO's request from time to time, NeoMagic-J shall
certify as to its compliance with the foregoing sentence, and MELCO shall have
the right to audit such compliance.
8.3 Quarterly Reports. In the event that WAFERS are manufactured on
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a standard DRAM processing line, MELCO will provide NeoMagic-J at regular
intervals with MELCO's standard quarterly reports concerning quality and
reliability data of its 16M commodity DRAM products. In the event that
NeoMagic-J's DRAM products are the only DRAM products being manufactured on a
particular processing line, MELCO will provide NeoMagic-J at regular intervals
with SPC data.
8.4 Assistance by MELCO. MELCO shall provide assistance reasonably
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requested by NeoMagic-J in connection with failures detected in testing as well
as corrections to prevent such failures.
8.5 Notice of Process Changes. MELCO will not to implement material
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Process changes which affect the quality, reliability, cost or Yield of the
Devices without reasonable advance notice to NEOMAGIC-J.
8.6 Manufacturing Audits. MELCO will provide reasonable assistance
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for NeoMagic-J's quality personnel to audit MELCO's manufacturing facilities.
8.7 P.C.M. Data. MELCO will provide Process Control Monitor (P.C.M.)
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data on the first fifty (50) lots of each new product. Thereafter such data
will be provided upon request.
9. WARRANTY
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9.1 Warranty. MELCO warrants to NeoMagic-J that, after delivery of
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Wafers to NeoMagic-J until the end of the acceptance inspection, the DRAM Memory
Module shall conform to the specifications set forth in Appendix A hereto. In
the event within one year from shipment, if the DEVICE, INCLUDING BUT NOT
LIMITED TO THE DRAM MEMORY MODULE, were found defective, Wafers may be returned
provided that MELCO shall agree that any asserted defects or failures were
caused by MELCO's material, and workmanship and not by NeoMagic-J during further
processing at assembly, test and handling. After such AGREEMENT by MELCO, Wafers
may be returned according to Section 9.4 and MELCO's liability will be limited
to the replacement of such defective Wafers under the provision that necessary
equipment to Process the Wafers are still available. If not available, MELCO and
NeoMagic-J shall negotiate in good faith.
9.2 Inspection. NeoMagic-J shall be responsible for inspection of
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the Wafers upon delivery under Section 10.3 of this Agreement. Such inspections
shall be carried out at NeoMagic-J's expense within 30 days of such delivery.
Such inspections shall be carried out in accordance with the Inspection
Specifications set forth in Appendix F hereto.
9.3 Notice. If NeoMagic-J claims that any portion of the DRAM Memory
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Module does not conform to the specifications set forth in Appendix D or E,
respectively, as a result of the inspection, NeoMagic-J shall immediately give
MELCO notice of such non-conformance. Failure to inspect or provide MELCO with
notice of non-conformance within the thirty (30) day inspection period shall
constitute a waiver of NeoMagic-J's right to reject the Devices and Wafers.
9.4 Remedies. Upon request by MELCO, NeoMagic-J shall return all
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alleged non-conforming Wafers to MELCO. MELCO shall HAVE A RIGHT TO determine
whether such Wafers are non-conforming. MELCO's warranty shall not cover,
extend to or apply to defects, damage or deterioration to the Wafers caused by
NeoMagic-J or any third party. In the event MELCO determines that any non-
conformance of the Wafers is its responsibility, it shall supply replacements or
cancel the Purchase Order concerned, as agreed to by the parties in each case.
All freight charges and charges associated with the return of non-conforming
Wafers to MELCO from NeoMagic-J's facility and the shipment of replacement items
therefor to NeoMagic-J from MELCO shall be borne by MELCO. If, however, MELCO
determines that such returned Wafers are conforming, NeoMagic-J shall bear all
such freight charges, export and import duties (if any) and costs incurred by
MELCO for obtaining and returning such Wafers.
9.5 Disclaimers. THE DRAM MEMORY MODULE AND PROCESS QUALITY
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WARRANTIES SET FORTH ABOVE ARE EXCLUSIVE AND NO OTHER PRODUCT QUALITY WARRANTY,
WHETHER WRITTEN OR ORAL, IS EXPRESSED OR IMPLIED. MELCO SPECIFICALLY DISCLAIMS
THE IMPLIED WARRANTIES OR MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
THE REMEDIES PROVIDED UNDER THIS ARTICLE 9. SHALL BE THE PARTIES' SOLE AND
EXCLUSIVE REMEDIES WITH RESPECT TO PRODUCT QUALITY. IN NO EVENT SHALL MELCO BE
LIABLE TO NEOMAGIC-J FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE OR
CONSEQUENTIAL DAMAGES DUE TO ANY CAUSE.
10. DELIVERY AND SHIPMENT
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10.1 Shipment Upon Fabrication. MELCO shall arrange to ship Wafers
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upon completion of fabrication cycle times or on the requested shipment date,
provided, however, that the parties shall negotiate with each other in good
faith, if delay in delivery occurs.
10.2 Delivery Instructions. MELCO shall arrange to deliver the Wafers
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in accordance with reasonable instructions contained in NeoMagic-J's accepted
Purchase Orders.
10.3 DELIVERY Terms. All DELIVERIES shall be MADE AT F.O.B. specified
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point in, Japan. Title and risk of loss to the Wafers shall pass to NeoMagic-J
upon delivery of the Wafers to the carrier at the F.O.B. point.
10.4 Yield Requirement. MELCO shall not ship Wafer Lots with a Yield
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rate lower than [*] for the DRAM Memory Module unless the parties agree
otherwise in writing. MELCO's shipments of Wafers in any calendar quarter may
vary in quantity within the range of a Wafer Lot.
10.5 Fabrication Cycles. MELCO shall use commercially reasonable
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efforts to manufacture Wafers within a fifteen (15) week fabrication cycle time
including four (4) week metalization cycle time for two (2) metal products.
Fabrication cycles will be deemed to commence upon the wafer start and end on
the date of first delivery of the order quantity to the F.O.B. point.
Metalization cycle time shall be deemed to commence upon the beginning of the
first aluminum process and end on the SHIPMENT from the plant. However,
fabrication cycle times and metalization cycle times will be based on actual
workdays. MELCO shall use commercially reasonable efforts to shorten the cycle
times.
10.6 Lead Time. Unless otherwise agreed in writing by the parties,
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the lead time for all orders based on Section 3.2 shall be fifteen (15) actual
workweeks.
[*] Confidential Treatment Requested
11. CONTINGENCIES
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Neither party shall be liable to the other party for any damage, delay
or failure to perform due to any cause beyond its reasonable control, including
but not limited to act of God, government restriction, war, riot, embargo, labor
stoppage, act of civil or military authority, fire, flood, earthquake or
accident; provided that a party shall have the right to terminate this Agreement
upon at least sixty (60) days prior notice if the other party's delay or default
due to such a cause continues for a period of at least six (6) months. No such
cause shall excuse any payment obligation of a party for amounts which are due
and payable or which become due and payable during any such cause.
12. CONFIDENTIAL INFORMATION; PROPRIETARY RIGHTS
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12.1 MELCO and NeoMagic-J are parties to a Confidentiality Agreement
dated October 20, 1993, a copy of which is attached hereto as Appendix G.
Confidential Information received from the other party with respect to this
Agreement shall be used solely for the purpose of this Agreement, and such
Confidential Information shall not be disclosed to any third party without the
prior written permission of the disclosing party for a period of five (5) years
after termination or expiration of this Agreement.
12.2 All Confidential Information and any copies thereof are and shall
remain the property of disclosing party. MELCO shall own and, subject to the
express terms and conditions of this Agreement, shall retain all right, title
and interest in and to the Mitsubishi Proprietary Technology and NeoMagic-J or
its Associated Companies shall own and, subject to the express terms and
conditions of this Agreement, shall retain all right, title and interest in and
to the NeoMagic-J Proprietary Technology. Notwithstanding anything to the
contrary herein, NeoMagic-J or its Associated Companies shall solely own all
right, title and interest in and to any and all intellectual property covering
the Devices, subject only to Mitsubishi's ownership of intellectual property
covering the Process and the DRAM Memory Module.
13. INTELLECTUAL PROPERTY INDEMNITY
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13.1 Indemnification by NeoMagic. NeoMagic-J and/or its Associated
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Companies shall defend AND INDEMNIFY MELCO against or settle any third-party
actions or claims based upon the use or incorporation of technical information
provided by NeoMagic-J and/or its Associated Companies under this Agreement,
specifically excluding, however, the DESIGN OF DRAM MEMORY MODULE AND PROCESS
("Claims"), alleging that the manufacture by MELCO or sale by MELCO to NeoMagic-
J and/or its Associated Companies of the Devices or Wafers under this Agreement
infringes or violates any patent, trademark, copyright, trade secret or similar
intellectual property right of the claimant. NeoMagic-J and/or its Associated
Companies shall purchase any work-in-process for Wafers which are the subject of
a Claim which results in the payment of fees for the use of technology of the
claimant to manufacture Devices or Wafers or which are the subject of a judgment
of a court of competent jurisdiction ruling that such manufacture or sale
constitutes an infringement or violation of the third party's intellectual
property. The obligations of NeoMagic-J under this section shall be
subject to MELCO providing NeoMagic-J (i) prompt notice of the Claim, (ii)
reasonable non-monetary assistance in connection with the defense of the Claim
(at NeoMagic-J's expense and/or its Associated Companies' expense excluding
MELCO's employee expense), and (iii) provided that NeoMagic-J and/or its
Associated Companies assumes and diligently pursues the defense of the Claim,
full control of the defense and settlement of the Claim. Notwithstanding the
foregoing, NeoMagic-J and/or its Associated Companies may not agree to settle
any such Claim without MELCO's prior written consent if such settlement includes
(a) any licensing of Mitsubishi Proprietary Technology or (b) an injunction that
binds MELCO in any way other than an injunction prohibiting MELCO from
manufacturing and distributing the Device to NeoMagic-J (whether or not in a
Wafer). NeoMagic-J and/or its Associated Companies shall keep MELCO apprised of
the progress of any Claims covered by this Section. Notwithstanding the
foregoing, the obligation of NeoMagic-J and/or its Associated Companies to
indemnify MELCO under this section shall not apply to any actions or claims
described in Section 13.2 of this Agreement.
13.2 Indemnification by MELCO. MELCO shall defend AND INDEMNIFY
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NeoMagic-J and/or its Associated Companies against or settle any third-party
actions or claims alleging that the manufacture by MELCO or sale or importation
by NeoMagic-J or its Associated Companies of the Devices or Wafers under this
Agreement infringes or violates any patent, trademark, copyright, trade secret
or similar intellectual property right of the claimant, to the extent such
claims allege that the DESIGN OF THE DRAM MEMORY MODULE AND PROCESS infringe or
violate such intellectual property rights of the claimants ("MELCO Claims").
MELCO shall repurchase from NeoMagic-J any Devices or Wafers purchased by
NeoMagic-J and still in its possession which are the subject of a MELCO Claim,
the settlement of which results in the payment by NeoMagic-J and/or its
Associated Companies of fees for the use of technology of the claimant to sell
or use Devices or Wafers or which are the subject of a judgment of a court of
competent jurisdiction ruling that manufacture, sale or use of the Devices or
Wafers constitutes an infringement or violation of the third party's
intellectual property. The obligations of MELCO under this section above shall
be subject to NeoMagic-J and/or its Associated Companies providing MELCO (I)
prompt notice of the MELCO Claim, (ii) reasonable non-monetary assistance in
connection with the defense of the MELCO Claim (at MELCO's expense excluding
NeoMagic-J and/or Associated Company employee expense), and (iii) provided that
MELCO assumes and diligently pursues the defense of the MELCO Claim, full
control of the defense and settlement of the MELCO Claim. Notwithstanding the
foregoing, MELCO may not agree to settle any such MELCO Claim without the prior
written consent of NeoMagic-J and/or the Associated Companies if such settlement
includes (a) any licensing of NeoMagic-J and/or Associated Company Proprietary
Technology or (b) an injunction that binds NeoMagic-J and/or its Associated
Companies in any way other than an injunction prohibiting NeoMagic-J, its
Associated Companies or their reseller customers from selling or using the
Device (whether or not in a Wafer). MELCO shall keep NeoMagic-J and/or its
Associated Companies apprised of the progress of any MELCO Claims covered by
this section. Notwithstanding the foregoing, MELCO's obligation to indemnify
NeoMagic-J or its Associated Companies under this section shall not apply to any
actions or claims described in Section 13.1 of this AGREEMENT.
MELCO assumes no liability for (i) infringement claims CAUSED BY
combinations of the DRAM MEMORY MODULE design with software or hardware not
provided by MELCO if the infringement could have been avoided by the use of
other commercially acceptable non-infringing software or hardware; or (ii)
infringement claims resulting from any modification of the DRAM core design by
NeoMagic-J and unapproved by MELCO, if the infringement would have been avoided
in the absence of such modification.
13.3 Entire Liability. THIS ARTICLE STATES EACH PARTY'S ENTIRE
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LIABILITY AND OBLIGATION (EXPRESS, STATUTORY, IMPLIED OR OTHERWISE) WITH RESPECT
TO INTELLECTUAL PROPERTY INFRINGEMENT OR VIOLATION OR CLAIMS THEREFOR ARISING
OUT OF THE MANUFACTURE AND SALE OF WAFERS OR DEVICES PURSUANT TO THIS AGREEMENT.
14. ENTIRE AGREEMENT
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This Agreement, together with all Appendices hereto, together with
that certain Prototype Wafer Supply Agreement dated as of September 1, 1995
concerning the Device known as the NMG2 and the agreement referenced and amended
in Section 12.1 of this Agreement, constitute the entire agreement and
understanding among NeoMagic-J and MELCO with respect to the manufacturing and
sale of Wafers and supersede all prior agreements, dealing, and negotiations
with respect thereto. No modification, alteration or amendment of this
Agreement shall be effective unless in writing and signed by authorized
representatives of the parties. No waiver of any breach shall be held to be a
waiver of any other or subsequent breach.
15. TERMINATION FOR CAUSE
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15.1 Subject to Section 16.3, either party ("terminating party") may
terminate this Agreement immediately upon giving notice in the event of one or
more of the following:
(a) the other party enters into voluntary or involuntary bankruptcy or
insolvency or ceases to make payments to its creditors;
(b) the other party liquidates its business relating to the Wafers or
Devices or makes or causes to be made an assignment of its assets or business,
either in whole or in part, for the benefit of its creditors;
(c) a receiver, trustee or similar fiduciary is appointed to take
over, administer or conduct all or a substantial part of the business or
property of the OTHER party; or
(d) the other party dissolves or liquidates its assets.
15.2 If a substantial change occurs in the ownership or control of the
other party as a result of the purchase of a majority of the equity securities
in such other party (except as a result of an
initial public offering pursuant to the Securities Act of 1933) without the
prior written consent of the first party for this Agreement to continue after
such change in control (which consent shall not be unreasonably withheld) the
first party may terminate this Agreement upon notice to the other, such
termination to become effective on the sooner of twelve (12) months after it is
given or upon the end of the term of this Agreement.
15.3 If either party is involved in any of the events or occurrences
enumerated in Section 15.1 or 15.2, such party shall give the other party with
immediate notice thereof.
15.4 If a party breaches any of the terms of this Agreement, which
breach shall include without limitation the failure to make full and complete
payment of any amount when due, the other party shall have the right to
terminate this Agreement unless the party committing such breach shall have
corrected such breach within sixty (60) days after receipt of notice thereof
from the party alleging such breach.
16. RIGHT AND OBLIGATION UPON TERMINATION
-------------------------------------
16.1 Termination of this Agreement for any reason shall not affect any
obligation arising prior to the effective date of termination or expiration and
any obligation which from the context thereof is intended to survive the
termination of this Agreement.
16.2 In addition, termination of this Agreement (a) by one party shall
not affect NeoMagic-J's obligation to pay all amounts due or to become due to
MELCO as of the date of termination or (b) by NeoMagic-J shall not affect
Purchase Orders already accepted by MELCO. The price in effect at the
termination date shall apply to deliveries thereafter.
16.3 In the event that MELCO terminates this Agreement pursuant to
Section 15.1 above, MELCO agrees to supply Wafers on the same terms and
conditions herein to NeoMagic-J's customers upon request by such customers.
Neo-Magic-J agrees to provide MELCO with a list of such customers reasonably
prior to the occurrence of any of the events specified in Section 15.1 above.
MELCO agrees that such customers are third party beneficiaries of this Agreement
and may enforce this Section 16.3 against MELCO.
17. NOTICES
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17.1 Any notice given under this Agreement shall be in writing and
shall be sent by registered mail or certified mail, postage prepaid, return
receipt requested, or by any other overnight delivery service which delivers to
the noticed destination and provides proof of delivery to the sender. All
notices shall be effective when first received by a party at the following
address (or to such other address as may be specified by such party by notice in
accordance herewith):
If to MELCO: Mitsubishi Electronic Corporation
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If to NeoMagic-J: NeoMagic Japan K.K.
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18. NO IMPLIED LICENSE
------------------
Except as may be otherwise expressly provided for in this Agreement,
neither the terms and conditions of this Agreement nor the acts of any party
pursuant to this Agreement or related to NeoMagic-J's purchase, use, sale or
other distribution of the Wafers or Devices may be considered in any way as a
grant of any license whatsoever under MELCO's or NeoMagic-J's present or future
patents, copyrights, trademarks, trade secrets or other proprietary rights, nor
is any such license granted by implication, estoppel or otherwise.
19. GENERAL
-------
19.1 All publicity and public announcements concerning the formation and
existence of this Agreement shall be planned and coordinated by and between the
parties. Neither party shall disclose any of the provisions of this Agreement
without the prior written consent of the other party, which consent shall not be
unreasonably withheld; provided that, a party may disclose, in a manner
consistent with industry standards and custom, the existence of this Agreement
and that the parties are doing business with the other without disclosing the
terms of any provisions of this Agreement. Notwithstanding the foregoing,
either party may disclose any information concerning this Agreement to the
extent required by the rules, orders, regulations, subpoenas or directives of a
court, government or governmental agency, after giving prior notice to the other
party and subject to the disclosing party obtaining confidentiality treatment of
the Agreement's provisions to the extent permitted.
19.2 As used in this Agreement, except for terms of payment and cure period
for default and where otherwise noted, the term "days" shall mean business days.
19.3 Each party is an independent contractor and not an agent or employee
of the other party. Neither MELCO nor NeoMagic-J is authorized to represent or
make any commitments on behalf of the other.
19.4 Except as otherwise specified in this Agreement, all rights and
remedies conferred by this Agreement, by any other instrument or by laws are
cumulative and may be exercised singularly or concurrently. If any provision of
this Agreement is held invalid or unenforceable pursuant to any law or
regulation of any government or by any court, such invalidity or
unenforceability shall not affect the enforceability of other provisions
contained in this Agreement. This Agreement and any Purchase Orders issued
under this Agreement shall be governed by and interpreted in accordance with the
laws of Japan.
19.5 Neither party shall be liable for indirect, special or consequential
damages, loss of use of the Device or Wafers or loss of profits by reason of any
breach or default under this Agreement.
19.6 Clause headings contained in this Agreement are for reference purposes
only and have no interpretative significance.
19.7 Each party shall be responsible for compliance with the U.S. Export
Administration Regulations in connection with their respective exports from the
United States of commodities or technical data relating to this Agreement and
with the export laws of Japan in connection with their respective exports from
Japan of such commodities or technical data.
19.8 If there are any conflicts between the English language version of
this Agreement and any Japanese language version of this Agreement, the parties
shall confer and in good faith attempt to resolve the conflict by referring to
the English language version as a base.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
by their authorized representatives as of the day and year first above written.
NEOMAGIC JAPAN K.K. MITSUBISHI ELECTRIC CORP
By:___________________ By:_____________________
Name:_________________ Name:___________________
Title:________________ Title:__________________
WITNESSED BY: WITNESSED BY:
NEOMAGIC INTERNATIONAL NEOMAGIC CORPORATION
BY:___________________ BY:_____________________
NAME:_________________ NAME:___________________
TITLE:________________ TITLE:__________________
Appendices
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A - Process
D - DRAM Memory Module - Specifications
E - Process Specifications
F - Inspection Specifications
G - Confidentiality
Appendix A
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Process Process ID
-------------------------------------- --------------------------------------
16 Meg ASIC DRAM Generation 2.5
16 Meg ASIC DRAM Generation 3.0
Appendix D
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[ * ]
[Confidential Treatment Required]
Appendix E
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[ * ]
[Confidential Treatment Required]
Appendix F (plan)
-----------------
Specification for wafer appearance inspection
---------------------------------------------
1. Method for inspection
This inspection is basically done by looking at wafers with naked eye.
2. Inspection standard
A wafer which satisfies one of the following conditions should not be
shipped.
Conditions:
(1) Broken wafer (Except for a wafer that has broken edges which size is
smaller than the size of fig. 1.)
(2) Cracked wafer
(3) Crooked wafer which cannot be diced
(4) No glass coated wafer
(5) No PIX coated wafer
Appendix G
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[ * ]
[Confidential Treatment Required]
