EXHIBIT 10.21
WAFER SUPPLY AGREEMENT
----------------------
THIS AGREEMENT, made and entered into as of this 1st day of October, 1998
(the "Effective Date") by and between:
(1) Power Integrations, Inc., a Delaware corporation having its principal
place of business at 000 X. Xxxxxxxx Xxx; Sunnyvale, CA U.S.A. ("PI");
and
(2) OKI ELECTRIC INDUSTRY CO., LTD., a Japanese corporation having its
registered head office at 7-12, Xxxxxxxxx 0-xxxxx, Xxxxxx-xx, Xxxxx
000-0000, Xxxxx ("OKI").
WITNESSETH:
WHEREAS, OKI is engaged in providing wafer foundry services for IC companies;
and
WHEREAS, PI is engaged in the design, development, marketing and sale of
various IC products for use in power source applications; and
WHEREAS, PI desires to acquire from OKI fabrication and supply of wafers of
certain IC products, and OKI is willing to supply such wafers to PI within the
limitation of available production capacity of OKI.
NOW, THEREFORE, in consideration of the above premises and the mutual
covenants of the parties contained herein, PI and OKI hereby agree as follows:
Article 1. (Definitions)
--------- -----------
When used throughout this Agreement, each of the following terms shall have
the meaning indicated below:
1.1 PRODUCTS: Any and all IC products of PI which will be processed in
---------
accordance with the PI PROCESS.
1.2 WAFERS: Non-probed four (4) and/or five (5) inch silicon wafers
-------
produced during the PILOT PRODUCTION and VOLUME PRODUCTION which meet the
COMMON
Page 1 of 23 Confidential
[*] IDENTIFIES REDACTED MATERIAL DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
SPECIFICATION.
1.3 PILOT PRODUCTION: The production by OKI of WAFERS for the purpose of
-----------------
evaluation by PI.
1.4 VOLUME PRODUCTION: The production by OKI of WAFERS for the volume
------------------
production of PRODUCTS.
1.5 PI PROCESS: PI's process technologies, which are implemented in the
-----------
OKI wafer fabrication facility to produce the WAFERS, and of which the
detailed specification is specified in the COMMON SPECIFICATION plus any
improvements made by PI or jointly by PI and OKI during the term of the
Agreement.
1.6 OKI PROCESS: OKI's process technologies developed exclusively by OKI
------------
and implemented in the OKI wafer fabrication facility to produce the
WAFERS.
1.7 COMMON SPECIFICATION: The specifications for the production, delivery
---------------------
and acceptance of the WAFERS which are defined in the EXHIBIT C attached
hereto.
1.8 INDIVIDUAL SALES CONTRACTS: Individual contracts of sale and purchase of
---------------------------
the WAFERS that will be concluded between OKI and PI pursuant to this
Agreement. INDIVIDUAL SALES CONTRACTS are only for the purposes of
establishing the quantity, delivery dates, and pricing of WAFERS, and no
other terms and conditions stated in any INDIVIDUAL SALES CONTRACTS have
any force or effect. The terms and conditions of this Agreement apply to
all INDIVIDUAL SALES CONTRACTS.
1.9 LWS AGREEMENT: The Licensing and Wafer Supply Agreement, dated June 18,
--------------
1993, between OKI and PI, including all amendments.
1.10 SUBSIDIARY: Any corporation, company or other entity in which OKI or PI,
-----------
as the case may be, owns and/or controls, directly or indirectly, now or
hereafter, more than fifty percent (50%) of the outstanding shares of stock
entitled to vote for the election of directors or their equivalents
regardless of the form thereof (other than any shares of stock whose voting
rights are subject to restriction); provided, however, that any entity
which would be a SUBSIDIARY by reason of the foregoing shall be considered
a SUBSIDIARY only so long as such ownership or control exists.
1.11 OKI: OKI and any of its SUBSIDIARIES unless otherwise expressly provided.
----
1.12 PI: PI and any of its SUBSIDIARIES unless otherwise expressly provided.
---
Page 2 of 23 Confidential
[*] IDENTIFIES REDACTED MATERIAL DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
1.13 CONFIDENTIAL INFORMATION: Technical information, or other non-public
-------------------------
information relating to PI and OKI, whether in a man-readable or machine-
readable form and whether recorded on paper, tape, diskette or any other
media, which is disclosed by the disclosing party to the receiving party,
and (i) which is designated in writing, by appropriate legend, as
confidential or, (ii) if disclosed orally is identified as confidential
information at the time of disclosure and a summary of which is confirmed
in writing within thirty (30) days after oral disclosure and designated, by
appropriate legend, as confidential. Not withstanding the foregoing, all
information generated by the activities and actions of OKI under this
Agreement on PI's behalf or any information including all PI INTELLECTUAL
---------------
PROPERTY received from PI by OKI to effect the terms of this Agreement
--------
shall also be considered PI's CONFIDENTIAL INFORMATION unless explicitly
agreed to be exempted by PI in writing.
1.14 OKI IMPROVEMENTS: Any modification or improvement to the OKI PROCESS or
-----------------
the PI PROCESS, developed exclusively by OKI, during the term of the
Agreement and all OKI improvements under the LWS Agreement.
1.15 JOINT IMPROVEMENTS: Any and all enhancements, modifications, derivative
------------------
works, improvements and/or changes made by OKI in conjunction with PI to
the PI PROCESS, the COMMON SPECIFICATION, the MASK TOOLING SETS, and/or the
PI CONFIDENTIAL INFORMATION.
1.16 MASK TOOLING SETS: Those MASK TOOLING SETS delivered by PI to OKI pursuant
------------------
to this Agreement.
1.17 PI INTELLECTUAL PROPERTY: The PI PROCESS, the COMMON SPECIFICATION, the
------------------------
MASK TOOLING SETS, the JOINT IMPROVEMENTS, and all INTELLECTUAL PROPERTY
RIGHTS in the foregoing.
1.18 INTELLECTUAL PROPERTY RIGHTS: Copyrights, patents, trade secrets, moral
----------------------------
rights, know-how and other intellectual or proprietary rights of any kind.
Article 2. (Foundry Commitment and Forecasts)
--------- --------------------------------
2.1 Both OKI and PI desire to enter into a relationship under which they will
act in good faith and cooperate to achieve their objectives to their mutual
benefit as set forth in this Agreement.
Page 3 of 23 Confidential
[*] IDENTIFIES REDACTED MATERIAL DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
2.2 OKI agrees to commit to PI the foundry capacity ("FOUNDRY CAPACITY")
set forth in EXHIBIT A attached hereto until March 31, 1999. Each January,
beginning in 1999, OKI and PI will meet to review PI `s non-binding twelve
(12) month forecast of wafer orders ("PI ANNUAL FORECAST") for the upcoming
OKI fiscal year (April 1 through March 31 of each year) and OKI's FOUNDRY
CAPACITY for the upcoming OKI fiscal year. For the period beginning on
April 1st, 1999 and annually on April 1st thereafter during the term of
this Agreement, OKI will commit a FOUNDRY CAPACITY for the current OKI
fiscal year, at the OKI plant specified per Section 3.3 , in an amount no
less than * Percent (*%) of PI's total wafer purchases during the previous
OKI fiscal year, and PI will submit the PI ANNUAL FORECAST on April 1st.
During the OKI fiscal year, OKI shall accept up to a * (*%) upside request
over the current FOUNDRY CAPACITY upon a three (3) month written advance
notice from PI. OKI can request PI to negotiate to reduce the committed
FOUNDRY CAPACITY, for the then current OKI fiscal year, if OKI and PI
determine that PI will not order at least *% of the PI ANNUAL FORECAST.
Any negotiated reduction in FOUNDRY CAPACITY must be agreed to by PI in
writing.
2.3 During the term of this Agreement, PI shall provide OKI on or before a
mutually agreed day of each calendar month a written forecast ("PI MONTHLY
FORECAST") of the quantity of the WAFERS of each PRODUCT to be manufactured
and delivered (if any) within the period of the following six (6) calendar
months which shall fall within the effective term of this Agreement,
provided that such forecast shall be in conformity with the FOUNDRY
CAPACITY.
2.4 PI must order at least the quantity of WAFERS forecasted in the first
two (2) months of the PI MONTHLY FORECAST unless OKI agrees to any change.
PI may revise the quantity for each of the last four (4) months of each PI
MONTHLY FORECAST without penalty or charge.
2.5 In the event of any direct or indirect governmental intervention in
Japan or the United States or in any country of destination of the WAFERS
purchased by PI, which intervention may virtually or legally render
infeasible supply of the full quantity of the WAFERS ordered by PI, then
OKI shall be obligated to supply only such quantity as may
Page 4 of 23 Confidential
[*] IDENTIFIES REDACTED MATERIAL DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
feasibly and legally be supplied without any liability to PI and PI will
have the right to terminate this agreement without liability, effective
upon written notice to OKI.
2.6 At the request of OKI, PI and OKI shall discuss allocating the
production of the WAFERS from one plant of OKI to another.
Article 3. (Sale and Purchase of WAFERS; INTELLECTUAL PROPERTY RIGHTS)
--------- ---------------------------------------------------------
3.1 As implementation of the foundry services provided in the preceding
Article, PI shall purchase from OKI, and OKI shall sell to PI, those WAFERS
ordered pursuant to the terms and conditions of this Agreement, which shall
be non-probed WAFERS.
3.2 Subject to the provisions of Section 3.1 above and 5.2 below, PI shall
submit to OKI a purchase order for the WAFERS which shall be substantially
in line with the binding forecast provided for in Section 2.4 above. Once
submitted, such purchase order shall be irrevocable except as set forth in
Section 2.4 and 2.5 above. All purchase orders shall be subject to
acceptance by OKI through issuance of a written confirmation within five
(5) business days of receipt of the purchase order. Upon such written
confirmation, the terms of the purchase order and confirmation relating to
total quantity, delivery time and pricing shall constitute a binding
INDIVIDUAL SALES CONTRACT which incorporates all of the terms and
conditions of this Agreement except to the extent expressly modified by the
INDIVIDUAL SALES CONTRACT. The mix of PRODUCTS and the quantity of WAFERS
allocated per each of the PRODUCTS in any INDIVIDUAL SALES CONTRACT can be
modified at any time, prior to the week the WAFERS ordered pursuant to such
Individual Sales Contract will be started, by PI with confirmation from OKI
so long as the total quantity of all WAFERS is not less.
3.3 The WAFERS sold hereunder shall be processed at OKI's * plant or other
plants of OKI as mutually agreed in writing by OKI and PI.
3.4 The sale and purchase of the WAFERS may be made between PI and OKI or
any of their respective SUBSIDIARIES pursuant to the terms and conditions
of this Agreement.
3.5 PI is and shall remain the sole and exclusive owner of all right, title
and interest in the PI INTELLECTUAL PROPERTY. Subject to all of the terms
and conditions of this agreement, PI grants OKI a limited, non-exclusive
license in the PI INTELLECTUAL
Page 5 of 23 Confidential
[*] IDENTIFIES REDACTED MATERIAL DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
PROPERTY for the sole purpose of using it internally to manufacture WAFERS
for PI in accordance with the terms and conditions of this Agreement. OKI
may not use the PI INTELLECTUAL PROPERTY for any other purpose or license
it to any party, unless a separate written agreement for any such rights is
executed by the parties.
3.6 OKI hereby does and will irrevocably and unconditionally transfer and
assign to PI all of OKI's right, title and interest worldwide in the JOINT
IMPROVEMENTS. OKI will promptly disclose in writing all OKI IMPROVEMENTS
to PI promptly upon their creation. OKI shall take all reasonable actions,
at PI's expense, to assist PI in perfecting and enforcing its rights in the
JOINT IMPROVEMENTS. Such actions shall include but not be limited to
execution of assignments, patent applications and other documents. Subject
to all of the terms and conditions of this agreement, PI hereby grants to
OKI a non-exclusive, irrevocable, perpetual, royalty-free, non-
transferable, worldwide, right and license, under all INTELLECTUAL
PROPERTY RIGHTS to use, modify, reproduce, (but sub-license only to an OKI
SUBSIDIARY) the JOINT IMPROVEMENTS for OKI's internal use only.
3.7 In the event that any portion of Section 3.6 is declared invalid or
illegal according to any applicable law, (a) OKI hereby waives and agrees
never to assert such rights, including any moral rights or similar rights,
against PI or PI's licensees and (b) the parties hereby modify such
portion, effective upon such declaration, in such manner as shall secure
for PI an exclusive, irrevocable, perpetual, worldwide, fully paid and
royalty-free license under all INTELLECTUAL PROPERTY RIGHTS, with rights to
sublicense through multiple levels of sublicensees, to use, modify,
reproduce, create derivative works of, distribute, publicly perform and
publicly display by all means now known or later developed, such rights in
the JOINT IMPROVEMENTS to the maximum extent permitted by applicable law.
3.8 OKI shall be the sole and exclusive owner of all right, title and
interest in the OKI IMPROVEMENTS. OKI hereby grants to PI a non-exclusive,
irrevocable, perpetual, royalty-free, non-transferable, worldwide, right
and license, under all INTELLECTUAL PROPERTY RIGHTS to use, modify,
reproduce, distribute and otherwise exploit in any manner the OKI
IMPROVEMENTS as part of the PI PROCESS and any modifications
Page 6 of 23 Confidential
[*] IDENTIFIES REDACTED MATERIAL DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
thereto. Without any consent of OKI, PI may sublicense the OKI IMPROVEMENTS
to PI's SUBSIDIARY so long as the sublicense provides for the protection of
OKI's Confidential Information on terms not less protective of OKI's rights
than those set forth the in the Agreement.
3.9 OKI agrees not to use the PI INTELLECTUAL PROPERTY or any license under
this Agreement in whole or in part or knowledge gained by OKI through
producing WAFERS for PI to develop an equivalent or competing process or
other product or service that would compete with PI.
Article 4. (Mask Tooling Sets)
--------- -----------------
4.1 The mask tooling sets for WAFERS of any PRODUCT shall be supplied by PI
to OKI one (1) week before its commencement of the WAFERS fabrication at no
cost to OKI. If, upon OKI's examination, the MASK TOOLING SETS are found
to be defective or not in conformance with the COMMON SPECIFICATION, OKI
shall immediately notify PI in detail as to such defects or non-conformity,
and PI shall either provide corrected MASK TOOLING SETS at PI's expense or,
notwithstanding any other provision of this Agreement, PI can cancel the
INDIVIDUAL SALES CONTRACT for the affected WAFERS, without any liability
except for affected WAFER work in progress ("WIP") and inventory, upon
written notice to OKI. The MASK TOOLING SETS shall be and remain PI's
CONFIDENTIAL INFORMATION.
Article 5. (Pilot Production and Minimum Order Quantity)
--------- -------------------------------------------
5.1 PILOT PRODUCTION
----------------
5.1.1 For the PILOT PRODUCTION, PI shall, if PI's desires to, place an
order with OKI for a minimum of * (*) WAFER starts (one (1) pilot
lot) or multiples thereof per each PRODUCT.
5.1.2 The output will be shipped to PI if the WAFERS output is at least *
percent (*%) of the ordered quantity. If the WAFERS output is less
than * percent (*%) of ordered quantity, OKI will inform PI of the
output quantity of the WAFERS and if PI requires to have the
shortage covered, OKI will re-input the WAFERS to cover
Page 7 of 23 Confidential
[*] IDENTIFIES REDACTED MATERIAL DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
the shortage of quantity at no additional cost to PI.
5.2 VOLUME PRODUCTION
-----------------
5.2.1 For the VOLUME PRODUCTION, PI shall place an order with OKI for a
minimum of * (*) WAFER starts (one (1) lot) or multiples
thereof per each PRODUCT and OKI will ship monthly orders in
quantities not less than * percent (*%) of the quantities ordered of
each PRODUCT.
5.2.2 The orders of PI for the VOLUME PRODUCTION shall be subject to the
provisions of Section 3.2 above.
Article 6. (Delivery)
--------- --------
6.1 The terms of delivery of the WAFERS shall be FOB Tokyo port or FCA
Tokyo airport (as such terms are defined in Incoterms 1990).
6.2 The title and risk of loss relating to the WAFERS delivered by OKI to
PI shall transfer from OKI to PI at such time and point as provided in
Incoterms 1990 relating to such FOB or FCA terms. PI shall have the right
to designate a freight forwarder, subject to OKI's reasonable approval.
6.3 OKI will deliver WAFERS within the number of calendar days after
receipt of PI's purchase order as specified in the order. In the event
that OKI foresees the delay of the delivery schedule of WAFERS, OKI shall
make a best effort to correct any delay and OKI shall promptly notify PI of
such delay and submit to PI the new delivery schedule. PI will have the
right to cancel, without liability, the INDIVIDUAL SALES CONTRACT for the
delayed WAFERS if the delay is greater than thirty (30) days.
6.4 OKI shall pack the WAFERS in accordance with packing standards which
shall be defined in the COMMON SPECIFICATION attached hereto.
Article 7. (Test and Inspection)
--------- -------------------
7.1 PI shall conduct incoming inspection according to the COMMON
SPECIFICATION. This inspection shall be regarded as final in terms of
quality, quantity and other conditions of the WAFERS supplied to PI subject
to OKI's warranty as defined in Section 11.1.
Page 8 of 23 Confidential
[*] IDENTIFIES REDACTED MATERIAL DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
7.2 PI shall notify OKI of a result of inspection judgment within * (*)
business days after the date of receipt by PI. Should PI fail to so notify
within the said * (*) business days, the shipment lot shall be deemed to
have been accepted by PI. PI will owe OKI payment only for the quantity of
wafers that have been accepted by PI.
7.3 OKI shall not be held responsible for the defects and failures which
are attributable to the design, test and assembly by PI of the PRODUCTS.
7.4 OKI shall not be held responsible for the defects, failures and yield
problems of the non-probed WAFERS if the WAFERS meet the specifications set
forth in the COMMON SPECIFICATION.
Article 8. (Process and Specification Changes)
--------- ---------------------------------
8.1. OKI shall notify PI in writing as soon as possible, in advance and in
accordance with the COMMON SPECIFICATION, of process changes which require
PI's change in data-base or which would affect the quality, reliability,
form, fit or function of the PRODUCTS in order to receive PI's prior
written approval of the process change. PI will have the right to cancel,
without liability, any INDIVIDUAL SALES CONTRACT affected by the process
change.
8.2. PI shall have sole responsibility for the control, maintenance,
distribution and modification of the COMMON SPECIFICATION including but not
limited to the addition and maintenance of applicable process, inspection,
quality and procurement specifications. PI will notify OKI of any changes
to the COMMON SPECIFICATION by amending Exhibit C and attaching the
relevant specification or documentation. OKI will acknowledge acceptance of
the COMMON SPECIFICATION in writing and OKI's acceptance of the COMMON
SPECIFICATION will not be unreasonable withheld. In the case of any issue
with the COMMON SPECIFICATION, OKI agrees that PI is the ultimate authority
on the COMMON SPECIFICATION.
PI and OKI shall specify in advance in writing the scope and purpose of any
JOINT IMPROVEMENT project for the purpose of pre-defining to what extent and
specifically which process technology will be considered a JOINT IMPROVEMENT.
OKI's rights under Section 3.6 shall not extend to any process technology not so
defined as a Joint Improvement.
Page 9 of 23 Confidential
[*] IDENTIFIES REDACTED MATERIAL DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Article 9. (Price and Charge)
--------- -----------------
9.1 The prices of the WAFERS of each PRODUCT, which are produced both in
the PILOT PRODUCTION and the VOLUME PRODUCTION are set forth in EXHIBIT B
attached hereto. Any modifications thereto must be agreed upon by OKI and
PI in writing, either as an amendment to EXHIBIT B or as part of an
INDIVIDUAL SALES CONTRACT. OKI and PI may jointly review and revise the
WAFERS price within * or upon a material change to the COMMON
SPECIFICATION.
9.2 In the event of any direct or indirect intervention of the Japanese,
the United States and/or any other relevant Governments, including the
legislative, administrative and judicial branches thereof, which may
virtually or legally disallow a price at which the WAFERS shall be supplied
under this Agreement, then OKI shall not be obligated to abide by such
price without any liability to PI and PI will have the right to terminate
this agreement without liability, effective upon written notice to OKI.
Article 10. (Payment)
---------- -------
Payment for the WAFERS shall be by telephonic transfer * (*) days
after receipt of invoice and secured by a standby letter of credit to be
opened at a first class bank acceptable to OKI. OKI agrees to negotiate
terms or alternate forms of payment as proposed by PI.
Article 11. (Warranty, Indemnification and Improvements)
---------- ------------------------------------------
11.1 OKI warrants that the WAFERS sold to PI under this Agreement and any
Wafers provided to PI under the LWS Agreement within the * (*) months
before the Effective Date of this Agreement will conform to their agreed
specifications set forth in COMMON SPECIFICATION attached hereto. OKI's
warranty provided in this Section shall not apply in case any non-
conformity or other defect is attributable to the design, assembly or test
of PI. PI shall notify OKI in writing of any such non-conformity or defect
of said WAFERS within three (3) months after the acceptance of the WAFERS
by PI per Section 7.2 above. OKI's sole obligations under this warranty
are limited to, at PI's option, (i)
Page 10 of 23 Confidential
[*] IDENTIFIES REDACTED MATERIAL DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
replacing or reworking any said WAFERS which shall be returned to OKI's
manufacturing facility with transportation charges prepaid, or (ii) OKI
crediting an amount equal to the purchase price of said WAFERS.
11.2 OKI shall defend, indemnify and hold harmless PI, its officers, directors,
employees and representatives from and against any claim, demand, cause of
action, debt, or liability, including reasonable attorneys' fees, relating
to or arising from allegations that the OKI PROCESS, OKI IMPROVEMENTS and
any OKI contributions to the JOINT IMPROVEMENTS used to produce WAFERS or
the resulting WAFERS under this Agreement or under the LWS Agreement
infringes any patent, copyright, trade secret or other right of any kind of
a third party; provided that OKI is promptly notified in writing of the
action and is allowed to assume and control the defense. OKI shall pay all
damages and costs awarded therein, but shall not be responsible for any
compromise or settlement made without OKI's consent.
11.3 EXCEPT AS EXPRESSLY STATED HEREIN, NO EXPRESS OR IMPLIED WARRANTIES ARE
MADE BY OKI RELATING TO THE WAFERS, INCLUDING BUT NOT LIMITED TO WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. PI MAKES NO
REPRESENTATION OR WARRANTY OF ANY KIND WITH REGARD TO ANY OF THE PI
INTELLECTUAL PROPERTY.
11.4 PI shall defend, indemnify and hold harmless OKI, its officers, directors,
employees and representatives from and against any claim, demand, cause of
action, debt, or liability, including reasonable attorneys' fees, relating
to or arising from allegations that the PI PROCESS and any PI contributions
to the JOINT IMPROVEMENTS used to produce WAFERS infringes any patent,
copyright, trade secret or other right of any kind of a third party;
provided that PI is promptly notified in writing of the action and is
allowed to assume and control the defense. PI shall pay all damages and
costs awarded therein, but shall not be responsible for any compromise or
settlement made without PI's consent.
11.5 OKI shall keep records for three (3) years, notwithstanding the termination
of this Agreement, of each processed lot manufactured and summaries of
process monitors. OKI agrees to permit such records to be examined and
copied by PI, or PI's authorized
Page 11 of 23 Confidential
[*] IDENTIFIES REDACTED MATERIAL DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
representative, upon reasonable prior written notice to OKI during normal
business hours at OKI's offices. Such records shall be deemed PI's
CONFIDENTIAL INFORMATION.
Article 12. (Confidentiality)
---------- ---------------
12.1 The receiving party shall use any CONFIDENTIAL INFORMATION acquired
from the disclosing party in connection with this Agreement solely for the
purposes of this Agreement.
12.2 For a period of * after the receipt of the CONFIDENTIAL INFORMATION,
or during the effective term of this Agreement, which may be longer, the
receiving party shall use a reasonable standard of care not to publish or
disseminate the CONFIDENTIAL INFORMATION to any third party, except as
otherwise provided herein. The receiving party shall have no obligation
with respect to any CONFIDENTIAL INFORMATION received by it which the
receiving party shall prove is:
12.2.1 Published or otherwise available to the public other than by a
breach of this Agreement or any other agreement by the receiving
party
12.2.2 Rightfully received by the receiving party hereunder from a third
party not obligated under this Agreement or any other agreement,
and without confidential limitation;
12.2.3 Known to the receiving party prior to its first receipt of the same
from the disclosing party;
12.2.4 Independently developed by the receiving party; or
12.2.5 Furnished to a third party by the disclosing party without a
similar restriction on the third party's right of disclosure.
In the case that Recipient intends to disclose publicly or to a third party
any CONFIDENTIAL INFORMATION under the previously defined exceptions above,
the Recipient must first give the disclosing party written notice (30)
thirty days prior to such a disclosure. CONFIDENTIAL INFORMATION approved
in writing by the disclosing party for release by the receiving party
without a confidentiality agreement designating the information as
confidential will remove the receiving party's obligations to the
CONFIDENTIAL INFORMATION.
Page 12 of 23 Confidential
[*] IDENTIFIES REDACTED MATERIAL DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
12.3 If any CONFIDENTIAL INFORMATION is disclosed pursuant to the requirement or
request of a governmental or judicial agency or disclosure is required by
operation of law, such disclosure will not constitute a breach of this
Agreement, provided that the receiving party shall promptly notify the
disclosing party and seek a protective order with respect thereto
reasonably satisfactory to the disclosing party to the extent available
under applicable law.
12.4 The receiving party shall limit access to the CONFIDENTIAL INFORMATION only
to such officers and employees of the receiving party who are reasonably
necessary to implement this Agreement and only to such extent as may be
necessary for such officers and employees to perform their duties. The
receiving party shall be liable to cause all of such officers and employees
to sign a secrecy agreement or to otherwise abide by the secrecy
obligations provided in this Agreement. The receiving party shall maintain
records of such officers and employees.
12.5 Confidential Information and all materials including, without limitation,
documents, drawings, masks, specifications, models, apparatus, sketches,
designs and lists furnished to the receiving party by and which are
themselves identified to be or designated in writing to be the property of
the disclosing party are and shall remain the property of the disclosing
party and shall be returned to the disclosing party promptly at its
request, including any copies.
12.6 Any CONFIDENTIAL INFORMATION disclosed by the disclosing party at any time
under the LWS AGREEMENT shall be deemed for the purpose of this Article to
be or have been disclosed pursuant to this Agreement as CONFIDENTIAL
INFORMATION. PI may disclose information with respect to any OKI
IMPROVEMENTS to the PI PROCESS to one or more third parties as PI
Confidential Information and covered by a non-disclosure agreement with
protection equivalent to this Agreement for the sole purpose of having such
third parties provide PI with design, layout, foundry, assembly and testing
services.
12.7 The COMMON SPECIFICATION will be CONFIDENTIAL INFORMATION for a period of *
after the term of this Agreement and OKI agrees to use its best efforts to
never make public the COMMON SPECIFICATION.
Page 13 of 23 Confidential
[*] IDENTIFIES REDACTED MATERIAL DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
12.8 PI may request the confidential release of OKI`s CONFIDENTIAL INFORMATION
to a customer of the PRODUCTS for purposes of such customer's evaluation or
audit. OKI shall not unreasonably withhold approval of the release.
Article 13. (Term and Termination)
---------- --------------------
13.1 This Agreement shall continue in full force and effect for a period of five
(5) years from the Effective Date, unless earlier terminated as provided
herein.
13.2 Notwithstanding anything to the contrary in Section 16.11 ("Force
Majeure"), If any Japanese governmental agency, entity or authority
requires (including through administrative guidance) any changes to this
Agreement, PI may terminate this Agreement immediately if the changes are,
in PI's sole discretion, detrimental to PI's interests or otherwise not
reasonably acceptable to PI, without liability of any kind.
13.3 In the event that either party has committed a material breach of this
Agreement, the other party shall have the right to terminate this Agreement
by giving sixty (60) days' written notice of termination specifying any
alleged material breach or breaches, such termination to become effective
at the end of said period unless during said period all material breaches
specified have been remedied or waived.
13.4 Either party shall also have the right to terminate this Agreement
with immediate effect by giving written notice of termination to the other
party at any time upon or after the occurrence of any of the following
events with respect to such other party:
13.4.1 Insolvency, bankruptcy, reorganization or liquidation or filing of
any application therefor, or other commitment of an affirmative act
of insolvency, which is not promptly removed or stayed;
13.4.2 Attachment, execution or seizure of substantially all of the assets
or filing of any application therefor which is not promptly
released or stayed;
13.4.3 Assignment or transfer of that portion of the business to which
this Agreement pertains to a trustee for the benefit of creditors;
13.4.4 Termination of its business or dissolution.
13.5 In the event either party shall be acquired or controlled, directly or
indirectly, by, or shall be consolidated or merged into, any other company
or corporation and reasonable
Page 14 of 23 Confidential
[*] IDENTIFIES REDACTED MATERIAL DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
assurance satisfactory to the other party shall not be forthcoming in
connection therewith as to the continued performance by the party's
successor of its obligations under this Agreement or in the event of such
other company or corporation being a direct and significant competitor of
the other party, then the other party shall notify the party's successor
immediately of such a determination in writing and will have the right for
a period of ninety (90) days to request negotiations to cure any concerns
and if no cure is obtained, to request to negotiate the orderly termination
of this Agreement by giving written notice to the party's successor.
13.6 No failure or delay on the part of either party in exercising its
right of termination hereunder for any one or more causes shall be
construed to prejudice its rights of termination for such cause or any
other or subsequent cause.
13.7 In the event of expiration or termination of this Agreement, within
sixty (60) days after expiration or termination of this Agreement, the
receiving party shall return to the disclosing party all media and
documentation containing the CONFIDENTIAL INFORMATION and render unusable
all said CONFIDENTIAL INFORMATION placed in any storage apparatus under the
receiving party's control in accordance with the instruction of the
disclosing party.
13.8 The termination or expiration of this Agreement shall not release
either party from any liability which at said date of termination or
expiration has already accrued to the other party. OKI waives any right to
damages for termination or expiration of this Agreement in accordance with
its terms except for affected WIP and WAFER inventory.
13.9 Notwithstanding any termination or expiration of this Agreement, the
provisions of Articles 1,11,12, Sections 13.7,13.8,13.9, Articles 14, 15,
16 shall survive this Agreement.
Article 14. (Government Regulations)
---------- ----------------------
14.1 Unless prior approval is obtained from the competent governmental agency,
each party shall not knowingly export or re-export, directly or indirectly,
any WAFERS to any country or countries to which export or re-export will
violate any laws or regulations of either the United States of America or
Japan.
Page 15 of 23 Confidential
[*] IDENTIFIES REDACTED MATERIAL DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
14.2 OKI shall obtain, at OKI's expense, any and all governmental licenses,
permits and approvals and make any necessary filings, registrations and
notifications in Japan which are required in connection with this Agreement
and shall provide PI with translated copies of any such documents.
Article 15. (Non-Disclosure)
---------- --------------
15.1 PI and OKI shall keep the terms and existence of this Agreement
confidential and shall not make disclosure thereof to any third party
except:
15.1.1 with the prior written consent of the other party, such consent
will not be unreasonably withheld,
15.1.2 as required by any governmental body having jurisdiction,
15.1.3 as otherwise required by law or regulations of a stock exchange at
which the shares of OKI or PI are listed, or
15.1.4 to legal counsel or accountants of the parties.
15.2 Neither of the parties shall unilaterally make any announcement of the
formation and existence of this Agreement without prior written consent of
the other party.
Article 16. (Miscellaneous Provisions)
---------- ------------------------
16.1 Entire Agreement. This Agreement embodies the entire understanding of the
----------------
parties as it relates to the subject matter hereof and this Agreement
supersedes any prior agreements or understandings between the parties with
respect to such subject matter, including without limitation all of the
provisions (including license grants) under the LWS. Any potential or
existing liabilities and claims regarding the purchase of and payment for
wafers under the terms of the LWS are declared by OKI and PI to be paid in
full and without further recourse.
16.2 Article Headings. The article and section headings herein are for
----------------
convenience only and shall not affect the construction hereof.
16.3 Waiver. Should either PI or OKI fail to enforce any provision of this
------
Agreement or to exercise any right in respect thereto, such failure shall
not be construed as constituting a waiver or a continuing waiver of its
rights to enforce such provision or right or any other
Page 16 of 23 Confidential
[*] IDENTIFIES REDACTED MATERIAL DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
provision or right.
16.4 No License. Nothing contained in this Agreement shall be construed as
----------
conferring by implication, estoppel or otherwise upon either party
hereunder any license or other right except as expressly set forth herein.
16.5 English Language. This Agreement is in the English language only,
----------------
which language shall be controlling in all respects, and all versions
hereof in any other language shall be for accommodation only and shall not
be binding upon the parties. All communications between OKI and PI to
effect the terms of this Agreement shall be in the English language only.
16.6 No Agency. The parties to this Agreement are independent contractors.
---------
There is no relationship of agency, partnership, joint venture, employment
or franchise between the parties. Neither party has the authority to bind
the other or to incur any obligation on its behalf. OKI shall not have,
and shall not represent that it has, any power, right or authority to bind
PI, or to assume or create any obligation or responsibility, express or
implied, on behalf of PI or in PI's name, except as herein expressly
permitted.
16.7 Notices. Any notice required or permitted to be given by either party
-------
under this Agreement shall be deemed to have been given at the time it is
delivered in writing by person or by telefax (provided that in the case of
telefax, a copy of the notice will promptly be delivered by overnight
courier) to the other party at the following respective addresses or such
new addresses as may from time to time be supplied hereunder.
To: OKI Electric Industry Co., Ltd.
000-0 Xxxxxxxxxxxxxx-xxx
Xxxxxxxx-xxx, Xxxxx 000-0000, Xxxxx
Attention: Eiki Kudo,
General Manager
Foundry BU Division
Fax: 00-000-00-0000
To: Power Integrations, Inc.
000 X. Xxxxxxxx Xxx.
Xxxxxxxxx, XX 00000
Page 17 of 23 Confidential
[*] IDENTIFIES REDACTED MATERIAL DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Attention: President
Fax: (000) 000-0000
16.8 Invalidity. If any provision of this Agreement, or the application
----------
thereof to any situation or circumstance, shall be invalid or
unenforceable, the remainder of this Agreement or the application of such
provision to situations or circumstances other than those as to which it
is invalid or unenforceable, shall not be affected; and each remaining
provision of this Agreement shall be valid and enforceable to the fullest
extent permitted by applicable law. In the event of such partial
invalidity, the parties shall seek in good faith to agree on replacing any
such legally invalid provisions with provisions which, in effect, will,
from an economic viewpoint, most nearly and fairly approach the effect of
the invalid provision.
16.9 Assignment. This Agreement and any rights or licenses granted herein
----------
shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns. Neither party shall assign any of
its rights or privileges hereunder without the prior written consent of
the other party except as set forth in Section 13.5. Such consent shall
not be unreasonably withheld.
16.10 Amendment. This Agreement may not be extended, supplemented or
---------
amended in any manner except by an instrument in writing expressly
referring to this Agreement and duly executed by authorized officers of
both Parties.
16.11 Force Majeure. Either party shall be excused for failures and delays
-------------
in performance caused by war, declared or not, any laws, proclamations,
ordinances or regulations of the government of any country or of any
political subdivision of any country, or strikes, lockouts, floods, fires,
explosions or such catastrophes as are beyond the control or without the
material fault of such party ("Causes"). Any party claiming any such
excuse for failure or delay in performance due to such Causes shall give
prompt notice thereof to the other party, and neither party shall be
required to perform hereunder during the period of such excused failure or
delay in performance except as otherwise provided herein. This provision
shall not, however, release such party from using its best efforts to
avoid or remove all such Causes and such party shall continue performance
hereunder with the utmost dispatch whenever such Causes are removed. In
the event that the period of
Page 18 of 23 Confidential
[*] IDENTIFIES REDACTED MATERIAL DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
excused performance continues for ninety (90) days, this Agreement may be
terminated by the affected party with written notice to the other party
without liability.
16.12 Indemnity. Both parties agree that neither party shall assume any
---------
responsibility or be liable for death or any injury or accident which may
occur to any personnel of the other party or the property of such
personnel during any visits to its facility, or otherwise. Each party
agrees to indemnify the other party and to hold such other party harmless
from and against all liabilities, claims and demands on account of
personal injuries (including death), or loss or damage to property,
arising out of or in any manner connected with the visits of its
personnel to such other party's offices or facilities and occasioned by
the negligence of such personnel, and it shall defend at its own expense
any and all actions based thereon and shall pay all reasonable charges of
attorneys and all costs and other expenses arising therefrom.
16.13 Arbitration. All disputes and differences between OKI and PI arising out
-----------
of or under this Agreement or the LWS Agreement shall be settled amicably
through negotiations. In case such dispute or difference cannot be
settled amicably through negotiations in a reasonable period of time, it
shall be finally settled by arbitration in San Francisco, California if
initiated by OKI and in Tokyo, Japan if initiated by PI pursuant to the
Japan-American Arbitration Agreement of September 16, 1952, by which each
party is bound. The award rendered by arbitrator(s) shall be final and
binding upon the parties hereto. The arbitrator's award shall be fully
enforceable in any court having jurisdiction of the parties and OKI
irrevocably consents to the non-exclusive jurisdiction of the California
courts for matters related to injunctive relief or the enforcement of
such award. Notwithstanding the foregoing, if the dispute involves the
protection of the CONFIDENTIAL INFORMATION or INTELLECTUAL PROPERTY
RIGHTS then either party make seek injunctive relief immediately from the
courts.
16.14 Limitation of Liability. EXCEPT AS TO OBLIGATIONS ARISING UNDER
-----------------------
SECTIONS 11.2 AND 11.4, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY
OR ANY THIRD PARTY FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES,
LOSS OF PROFITS OR REVENUE, LOST OPPORTUNITY, OR INTERRUPTION OF BUSINESS
IN ANY WAY ARISING OUT
Page 19 of 23 Confidential
[*] IDENTIFIES REDACTED MATERIAL DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
OF OR RELATED TO THIS AGREEMENT, REGARDLESS OF THE FORM OF ACTION,
WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT PRODUCT
LIABILITY OR OTHERWISE, EVEN IF ANY REPRESENTATIVE OF THE PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
16.15 Governing Law. This Agreement and matters connected with the
-------------
performance hereof shall be construed, interpreted, applied and governed
in all respects in accordance with the laws of California and the United
States without regard to conflict of laws principles.
16.16 OKI and PI shall each enter into separate written agreements with each of
their subsidiaries who wish to exercise any rights under this Agreement,
binding the subsidiary to the terms and conditions of this Agreement. OKI
and PI each guarantee to the other the performance of their respective
subsidiaries under this Agreement, and each will indemnify and hold
harmless the other from any costs, damages, or liabilities incurred by
the other arising out of a breach by a subsidiary of the terms and
conditions of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed in
their respective corporate names by their duly authorized representatives on the
date written below.
OKI Electric Industry Co., Ltd. Power Integrations, Inc.
Signature: /s/ Yasuahi Ozawa Signature: /s/ X.X. Xxxxxxx
------------------------- -------------------------
Name: Yasuahi Ozawa Name: X.X. Xxxxxxx
----------------------------- ------------------------------
Title: Dir. & Gen. Mgr. Lsi Div. Title: Pres. & CEO
---------------------------- -----------------------------
Date: Sep. 29, 1998 Date: September 30, 1998
----------------------------- ------------------------------
Page 20 of 23 Confidential
[*] IDENTIFIES REDACTED MATERIAL DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT A
OKI FOUNDRY CAPACITY and PI ANNUAL FORECAST
-------------------------------------------
1. OKI FOUNDRY CAPACITY:
4 inch wafer (M1 Fabrication.) 5 inch wafer (M2 Fabrication.)
------------------------------- ------------------------------
From July 1, 1998 * wafers per month * wafers / month
up to March 31, 1999
2. PI's projected PI ANNUAL FORECAST of WAFER orders (non-binding).
---------------------------------------------------------------------------------------
OKI Fiscal Year 1999 2000 2001 2002
---------------------------------------------------------------------------------------
4" Wafers * * * *
---------------------------------------------------------------------------------------
Page 21 of 23 Confidential
[*] IDENTIFIES REDACTED MATERIAL DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT B
WAFERS PRICE
------------
Production WAFERS (4") BASE_PRICE = *
F/X_BASE = *
Initial F/X_RATE = *
A new F/X_RATE is only established at the time of placing a purchase order for
WAFERSs if the Previous Month's Average daily exchange rate is equal to or
greater than * from the current F/X_RATE. The new F/X_RATE will be set to the
Previous Month's Average exchange rate and will remain in effect for at least
the month it was established.
The actual WAFERS PURCHASE_PRICE used at the time of order will be calculated by
the following formula:
PURCHASE_PRICE = *
Examples:
1) Nominal F/X Rate Example: F/X_RATE = *:
PURCHASE_PRICE = *
2) Higher F/X Rate Example: New F/X_RATE = *:
PURCHASE_PRICE = *
3) Lower F/X Rate Example: New F/X_RATE = *:
PURCHASE_PRICE = *
Additionally, a F/X_ADDITIONAL_CHARGE of * will be paid to OKI for each of the
WAFERS accepted by PI during the first year of the Agreement.
Page 22 of 23 Confidential
[*] IDENTIFIES REDACTED MATERIAL DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT C
COMMON SPECIFICATION
--------------------
The initial COMMON SPECIFICATION is the * to produce and deliver WAFERS to PI
under the LWS AGREEMENT on the effective date of this agreement.
Page 23 of 23 Confidential
[*] IDENTIFIES REDACTED MATERIAL DELETED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
