EXHIBIT 10.16
CONFIDENTIAL
WAFER SUPPLY AGREEMENT
This Wafer Supply Agreement (the "Agreement"), is dated and effective as of
April 22, 1999 (the "Effective Date"), by and between Mitsubishi Electronics
America, a Delaware corporation, having its principal place of business at 0000
Xxxx Xxxxxx Xxxxxx, Xxxxxxxxx, XX 00000-0000 ("MELA"), and Centillium
Communications, Inc., a California corporation with offices at 00000 Xxxxxxxx
Xxxx, Xxxxxxx, Xxxxxxxxxx, 94538("Centillium").
RECITALS
WHEREAS, Centillium Communications, Inc. Corporation desires to purchase
from MELA and MELA desires to supply to Centillium Communications, Inc.
Corporation silicon wafers on the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties agree as follows:
PART I
DEFINITIONS
1.1 "Fabrication Cycle Time" means the period of time required to
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manufacture the Products, commencing upon wafer start and ending on the day when
MELA first delivers the ordered quantity of Products. The Fabrication Cycle Time
for Prototype Production and Volume Production shall be as set forth in Exhibit
B. Fabrication Cycle Time does not include local national holidays and other
factory holidays and shutdowns.
1.2 "Lead Time" means the period of time, in calendar days, from the
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placement of a particular order of a Product until the date of first delivery of
the ordered quantity of the Product.
1.3 "Process" means the wafer manufacturing process (es) used by MELCO as
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identified in Exhibit A and any other manufacturing processes included within
the scope of this Agreement in accordance with Section 3.2.
1.4 "Products" means semiconductor chips containing any memory, I/Os,
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logic or analog elements manufactured hereunder. The Parties may, from time to
time, agree to add other product(s) or design cores to the definition and scope
of products.
1.5 "Prototype Production" has the meaning given in Section 3.8(a).
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1.6 "Volume Production" has that meaning given in Section 3.8(b).
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1.7 "Wafers" means processed silicon wafers containing finished die for
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the Products manufactured by MELCO and sold to Centillium Communications, Inc..
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CONFIDENTIAL
1.8 "MELCO" means MELA's ultimate parent company, Mitsubishi Electric
Corporation.
1.9 "Affiliate" means any corporation or business entity which is owned or
controlled by, owns or controls, or is under common ownership or control with, a
party. For purposes of this definition, "control" of a corporation or business
entity shall mean the right to exercise, directly or indirectly, more than
fifty, percent (50%) of the voting rights attributable to the shares of the
corporation or business entity or the power to direct or cause the direction of
the management or policies of the corporation or business entity.
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CONFIDENTIAL
PART II
INTELLECTUAL PROPERTY RIGHTS
2.1 Technical Information. All intellectual property and related rights in
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and to technical information of either party including an affiliate or either
party, which is provided to the other party in the course of the development of
the Product(s) shall continue to belong to such providing party. This
information shall be considered confidential and covered by a separate Non
Disclosure Agreement.
2.2 Patents. All intellectual property and related rights in and to all
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inventions made by Centillium Communications, Inc. and patents resulting
therefrom shall belong to Centillium Communications, Inc.. All intellectual
property and related rights in and to all inventions made by MELA and its
affiliates efforts and patents resulting therefrom shall belong to MELA and its
affiliates. All intellectual property and related rights in and to all
inventions jointly made by Centillium Communications, Inc. and MELA in the
course of the development efforts and patents resulting therefrom shall be
jointly owned by both companies. The parties shall confer with each other before
filing any patent claiming a joint invention. Each party shall promptly disclose
any such potentially patentable and jointly owned inventions to the other party;
and the parties will jointly establish whether such disclosed inventions are
sole or joint inventorship. Patents on sole inventions shall be filed at the
discretion and expense of the respective party. For jointly owned inventions,
the parties will jointly establish whether it would be advantageous to file, and
if so, how and where any jointly owned patent applications will be filed. The
reasonable expense of such jointly owned applications and patents shall be borne
equally by the parties. If one party declines to participate or fails to assume
any expense obligations in a timely manner, it shall relinquish to the other
party its right, title and interest in and to such jointly developed application
and patent. Any licensing of jointly owned inventions shall be at the discretion
of either joint owner, without the need for the consent of the joint owner, and
without any necessity of accounting for, sharing royalties with, or making any
other payment to the other joint owner. However, all such licensing of jointly
owned inventions shall be non-exclusive. MELA and Centillium will each have the
rights to utilize the intellectual property rights jointly developed hereunder,
if any, without further charge or cost to the other party. All intellectual
property rights granted to either party under this agreement shall extend to
such party's corporate parent, affiliates, and subsidiaries.
2.3 Product Rights; Maskworks. Notwithstanding Section 2.2, all worldwide
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title to and interest in mask works developed under this Agreement pursuant to
Centillium designs shall be owned by Centillium Communications, Inc. Masks will
be shipped to Centillium Communications, Inc. after discontinuance of
production. However once the masks are returned to Centillium, they will not be
re-used by MELCO for the re-start of Production. In case Centillium would want
MELA to re-start Production MELCO will make new masks at additional NRE. This
Agreement shall not be construed as granting or conferring any intellectual
property rights of MELA or Centillium Communications, Inc. specified in Part II
of this Agreement or with respect to the Products except as explicitly specified
herein.
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CONFIDENTIAL
2.4 Process. Subject to Sections 2.1, 2.2 and 2.3 above, MELA shall own
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all intellectual property and related rights in and to the jointly developed
Process.
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CONFIDENTIAL
PART III
WAFER SUPPLY
3.1 Wafer Manufacturing. On the terms and conditions of this Agreement,
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MELA will: (i)have MELCO manufacture processed Wafers; and (ii) sell processed
Wafers to Centillium Communications, Inc.. Centillium Communications, Inc. will
take ownership of the silicon after all processing has been completed and
electrical test results meet specification, see exhibit C. MELA will manufacture
all Wafers at its "Saijo" manufacturing facility. If MELCO or MELA desires to
change the location at which it manufacturers wafers, MELA shall first obtain
Centillium Communications, Inc. written consent such consent is not to be
unreasonably withheld.
3.2 Processes. MELA shall have MELCO manufacture the Wafers using the
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Process set forth in Exhibit A. If MELCO moves to a new or different Process,
MELCO will provide 120 days notice before the actual change and receive
authorization, which shall not be unreasonably withheld, from Centillium
Communications, Inc. within 30 days after MELA's notification of Centillium
Communications, Inc. MELCO will provide Centillium Communications, Inc. with all
information regarding such new processes (other than proprietary information
belonging to third parties) in order that Centillium Communications, Inc. can
ensure that MELCO can continue to manufacture wafers pursuant to this Agreement.
MELA will treat Centillium Communications, Inc. as a Key Account and as such
will continue to provide early access to newly developed processes during the
period this agreement is in force.
3.3 Qualification and Quality Control.
(a) Qualification. Centillium Communications, Inc. and MELA will
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cooperate fully to qualify jointly each Product for which Wafers will be
manufactured hereunder ("Qualification"). Accordingly, the parties will
cooperate to implement a Qualification procedure pursuant to which the parties
will agree on parameters to monitor product quality and reliability. After
qualification, Centillium Communications, Inc. will notify MELA when Volume
Production will commence. Processes will be capable of meeting *3200 PPM early
mortality (without Burn-in) and *200FITS with the data normalized to 85C
junction temperature and containing 2 million gates of 50% logic and 50% SRAM.
These are target PPM and FITS are not a commitment by MELA. HTOL data will be
provided to Centillium Communications on a quarterly basis detailing; Number of
Lots, Number of devices, Number of passes/fails (time when failed), HTOL
criteria (temperature, time, conditions).
(b) Changes. After Qualification of any Product, MELA shall not make
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any major and/or critical Process change which will impact the performance,
reliability or construction of the Products, without Centillium Communications,
Inc.'s prior written consent, which consent shall not be unreasonably withheld.
MELA shall notify Centillium Communications, Inc. in writing in advance of major
Process changes, including but not limited to any changes which may:
(i) degrade Product quality or reliability;
* Less than
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CONFIDENTIAL
(ii) result in failure of the Product to meet Centillium
Technology's specifications;
(iii) substantially slow lead times
(iv) change Process control variables, ranges or method;
(v) result in Product mask revisions or changes to Wafer sort
programs;
(c) Problem Notification. MELA will notify Centillium Communications,
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Inc. promptly (within 72 hours) upon discovering major Process problems in its
manufacturing lines that may affect the delivery capability of Wafers or Wafer
yields.
(d) Yield Improvement Help. MELA will notify Centillium
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Communications, Inc. of yield trends on a quarterly basis and what action is
being performed to resolve the issues.
3.4 Forecasts.
(a) Twelve-month Rolling Forecasts. Each week Centillium
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Communications, Inc. will provide MELA a rolling forecast ("Forecast") of the
number of Wafers, which Centillium Communications, Inc. intends to purchase
weekly during the next twelve (12) months. The Forecast will be based on "Wafers
out," i.e., on deliveries expected to be made by MELA each week. Upon execution
of the Agreement, the parties will agree upon an initial twelve month Forecast.
MELA shall supply at least the number of wafers agreed to by the parties in the
initial Forecast and each subsequent weekly Forecast.
(b) Forecast Acknowledgment. All Forecasts shall be mutually agreed
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upon by the parties, and MELA will treat Centillium Communications, Inc. as a
Key Account.
(c) Required Orders. Upon mutual agreement by the parties regarding
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the initial Forecast, Centillium shall issue a "blanket" purchase order for
those units identified in the initial Forecast and each subsequent weekly
Forecast issued in accordance with this Agreement. The parties shall agree on
the Forecast by the end of every week of the Centillium Communications, Inc.
calendar month. Authorization for payment against the forecast will be given
upon the determination of the yield, within 15 days of the shipment date
pursuant to Section 4.2.
For example, Centillium Communications, Inc. will issue a blanket P.O.
covering at least a 12 month forecast. Centillium Communications, Inc. must
submit a rolling 12 month forecast with weekly requirements, and if the forecast
is provided at the end of the week between April 26-30, 1999, and if the silicon
is shipped to Centillium Communications, Inc. from MELA on July 1 the payment
authorization will be given within 15 days i.e. on or before July 16.
NOTE: The forecast is for production orders only. The ramp-up-plan, pre-
qualification for the first product shall be mutually agreed between Centillium
Communications, Inc. and MELA.
(d) Limited Quantity Adjustments.
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CONFIDENTIAL
(i) For low volume production (*500 wafers/month) MELA agrees to use
commercially reasonable efforts to meet the Centillium Communications, Inc.
weekly forecast requirements.
(ii) Centillium Communications, Inc. may for high volume production (**500
wafers/month) increase or decrease Forecast quantities during the fourth and
fifth calendar month following the date of the Forecast by no more than twenty
percent (20%) and beyond the fifth calendar month following the date of the
Forecast by no more than thirty percent (30%). For months one through three
following the date of the Forecast, MELA shall use commercially reasonable
efforts to meet any upside requests made by Centillium, however, if Centillium
wants to decrease Forecast quantities Centillium may decrease up to 10% of the
first three months subject to payment of the cancellation charges in Section
3.8(c). However, during months one through three Centillium may, at no charge,
push back delivery, by no more than sixty (60) days, of up to ten percent (10%)
of the Forecast demand in any month.
For example
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Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
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500 1000 750 2000 3000 2000 1000 500 1000 300 3000 4000
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If Centillium Communications, Inc. submits the above forecast in March.
Then the Forecast for
i. April, May, June (1-3 month) Mela shall try to meet any upside
made by Centillium; however, if Centillium decreases forecast
quantities, this quantity may be decreased by 10%.
II. Jul, Aug (4-5 month) may increase or decrease by 20% per month
III. Sep (**5 month) and beyond may increase or decrease by 30% per
month
3.5 Demand. Centillium Communications, Inc. shall not be under any
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obligation to purchase wafers hereunder except as otherwise provided by Sections
3.4 or 3.8.
3.6 Purchase Order Process. All purchases under this Agreement will be
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initiated by a blanket purchase order and the forecast process as stated in
section 3.4. Forecast shall state unit quantities, unit descriptions, requested
delivery, dates and shipping instructions. This Agreement any prices agreed upon
by the parties pursuant to this Agreement, unit quantities, unit descriptions,
requested delivery dates and shipping instructions, shall constitute the
complete agreement between the parties with respect to the purchase and sale of
the Products and shall supercede all prior oral or written agreements,
representations and other communications between the parties relating to the
subject matter of this Agreement. This Agreement shall also supercede any
standard terms and conditions or pre-printed terms and conditions found on any
Purchase Order issued under this Agreement.
3.7 Order (Forecast) Acknowledgment. MELA agrees to accept Centillium's
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blanket purchase order to the extent it conforms to the mutually agreed upon
Forecasts, as outlined in Section 3.4, above.
* Less than
** Greater than
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CONFIDENTIAL
3.8 Prototype and Volume Production Lots. Centillium Communications, Inc.
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shall order Products in either Prototype Production lots or Volume Production
lots as follows:
(a) Prototype Lots. Centillium Communications, Inc. may order Wafers
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in prototype lots ("Prototype Production") whenever Centillium Communications,
Inc.: (i) seeks a Qualification in accordance with Section 3.3(a); (ii) seeks to
make any engineering changes, including without limitation changes to improve
Product functionality and Wafer yield; or (iii) elects, at Centillium
Communications, Inc. risk, to purchase Wafers in volume prior to Qualification.
A Prototype Production lot shall contain the number of Wafers specified in
Exhibit B. Centillium Communications, Inc. may order multiple Prototype
Production lots of the same Wafer. Centillium Communications, Inc. may require
MELA to hold Prototype Production at "gate" or "contact" intermediate stages of
production. Centillium Communications, Inc. should not hold lots longer than
ninety (90) days in such an intermediate stage. During Prototype and Production,
MELA will provide e-test data as specified in Exhibit G. Centillium
Communications, Inc. may request process splits (i.e., examine Wafers at a
particular step in fabrication) in order for Centillium Communications, Inc. to
evaluate variations within the specifications for each process.
(b) Volume Production Lots. Upon Qualification of any particular
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Product, Centillium Communications, Inc. may order that Product only in volume
production lot ("Volume Production"). A Volume Production lot shall contain the
number of Wafers specified in Exhibit B. Centillium has the right to request
finished wafers are held at MELA for 60 days, prior to shipment. In the case of
pre-qualification ramp up Centillium may request lots of a different lot size
are processed.
(c) Cancellation. Centillium Communications, Inc. may cancel product
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purchase order(s) or any portions thereof for any reason by notifying MELA in
writing prior to the scheduled delivery date on the purchaser order(s), provided
that Centillium Communications, Inc. pays the fees specified in this Section
3.8(c). Cancellation shall be effective upon MELA's receipt of the written
cancellation notice from Centillium Communications, Inc., or upon the date
specified in such cancellation notice if later than the date of receipt. MELA
shall cease all work on such cancelled purchase order quantities in accordance
with the cancellation notice; provided that Centillium Communications, Inc.
shall pay a cancellation charge calculated in the manner provided below
("Cancellation Charge"). MELA will invoice Cancellation Charges, if any,
immediately upon cancellation and Centillium Communications, Inc. will pay the
Cancellation Charge within thirty (30) days after receipt of invoice. The
foregoing rights shall be MELA's sole remedies for any cancellation of a
purchase order or failure to order quantities specified in a Forecast. The
Cancellation Charge shall be calculated as a percentage of the Wafer price, as
specified in Exhibit D otherwise payable based upon the number of weeks between
the date Centillium Communications, Inc. submits the cancellation notice and the
delivery date of the wafers as set forth in the then most current Report (as
defined in Section 3.9(b). Such rate is as follows
Prior to delivery date Monies due
* 2 weeks 100%
* 3 weeks 80%
* 5 weeks 60%
* Less than
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* 7 weeks 40%
*= 9 weeks 20%
** 9 weeks No cancellation charge
Forecast will be given on a weekly basis, broken down into weekly quantities.
At Centillium Communications, Inc. request MELA shall deliver all work-in-
process to Centillium Communications, Inc. or destroy all such work-in-process
and provide written certification of destruction to Centillium Communications,
Inc.. Notwithstanding the foregoing, there shall not be any cancellation change
if Centillium Communications, Inc. cancels an order before wafers are physically
started.
(d) Delivery Commitments. MELA will deliver wafers to the carrier for
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shipment, within one (1) day. MELA will use reasonable efforts to distribute the
manufacture of wafers evenly throughout each month (i.e., start and complete
Wafers linearly). Upon Centillium Communications, Inc. request, before
Centillium Communications, Inc. product qualification, MELA will hold Products
during their manufacture in accordance with terms to be agreed upon by the
parties. If wafers are requested to be held by Centillium Communications, Inc.
during manufacture, the foregoing delivery commitments will be extended by the
number of days that the Wafers are held.
(e) Work-in-Process Reporting. MELA will provide Centillium Communications,
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Inc. with work-in-process reports ("Reports") on a periodic basis, for at least
10 process steps. Reports shall be sent to Centillium Communications, Inc. via
email. The Reports shall include all of the information in Exhibit H. The format
of the report will be comma delaminated (excel") and frequency of the reports
shall be at least bi-monthly up to 500 wafers and weekly thereafter. This report
will be used by Centillium for information purpose only and not as an official
confirmation of delivery by MELA. If the wafer demand per design becomes very
small, the frequency of this report will be re negotiated
(f) Shipping. All Wafers shall be delivered to Centillium Communications,
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Inc. or its designated airport, pre-alerts are required to be sent from MELA to
Centillium Communications freight forwarder at least 24 hrs in advance and shall
be suitably packed for shipment in MELA's standard containers, marked for
shipment as specified in Centillium Communications, Inc. purchase order, and
delivered to a carrier or forwarding agent chosen by Centillium Communications,
Inc. However, should Centillium Communications, Inc. fail to designate a
carrier, forwarding agent or type of conveyance, MELA shall make such
designation in conformance with its standard shipping practices. Shipment will
be "ex works (EXW) fabrication location" according to the Incoterms 1990.
3.9 Test and Inspection.
* Less than
** Greater than
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CONFIDENTIAL
(a) By MELA. MELA will supply to Centillium Communications, Inc., with
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each Wafer shipment, process control monitor ("PCM") test results and visual
quality inspection results as agreed by the parties.
(b) Reports. MELA will supply Centillium Communications, Inc. with
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reliability and statistical quality data on the MELA standard processes, which
is made for the same product line, at regular intervals to be agreed upon but no
less than once a quarter. The format and the contents of these report(s) are to
be mutually agreed upon. Upon reasonable notice, MELA will allow Centillium
Communications, Inc. on-site inspection at reasonable intervals to ensure that
MELA follows the reliability and testing procedures set forth in this Agreement.
(c) By Centillium Communications, Inc. Wafers manufactured using the
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Process set forth in Exhibit A shall be subject to incoming inspection,
electrical testing and reliability testing by Centillium Communications, Inc. in
accordance with the acceptance criteria set forth in Exhibit C hereto. Wafers
manufactured under other Processes (jointly defined by the parties in accordance
with Section 3.2) shall be subject to incoming inspection, electrical testing
and reliability testing by Centillium Communications, Inc. in accordance with
updated acceptance criteria which the parties agree to negotiate in good faith
promptly at or prior to the implementation of any such other Process. Wafers
meeting applicable initial acceptance criteria or updated acceptance criteria
will be deemed accepted by Centillium Communications, Inc., if wafers do not
meet this criteria Centillium Communications will notify MELA within 72 hrs.
Centillium Communications will provide a monthly test report to MELA
(d) Test Failure. If any Wafer or lot of Wafers fails incoming
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inspection or test, and if test failure is caused by any defect in the Process
used by MELA, or any other design core provided by MELA, Centillium
Communications, Inc. may reject such lot or Wafer in writing as soon as possible
but at least within forty-five (45) days after delivery and return such lot or
Wafer to MELA, at MELA's expense, for a full refund. Centillium Communications,
Inc. will explain the reasons for wishing to reject a lot and MELA will be
entitled to examine any lot that Centillium Communications, Inc. wishes to
reject. The parties will seek in good faith to resolve any disagreement as to
whether a lot is conforming. After mutual agreement for return shipment,
Centillium Communications, Inc. shall use reasonable commercial efforts to use
MELA original packing, but in any event shall use commercially reasonable
packaging, and supply all identifying shipping documents in order to avoid any
deterioration of the goods.
(e) Low Line Yield on Volume Production. If the output per lot (i.e.,
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good die/wafer yield, which meets the inspection and test criteria, is less than
yield defined in Exhibit E and if Centillium Communications, Inc. so requests,
MELA will explain the reasons for the low line yield. Lots or Wafers with sort
yields below a yield defined in Exhibit E may not be shipped unless Centillium
Communications, Inc. prior approval is obtained.
(f) Yield Based Adjustments. Wafer prices shall be adjusted if the
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average Yield (as defined below) per Wafer Lot (as defined below) is outside the
allowance range ("Allowance Range," as further defined below). The Allowance
Range and standard yields are defined in exhibit D which will be mutually agreed
upon by the parties but in any event an Allowance Range will be
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defined and shall not be less than 20% of the standard yield defined in Exhibit
D. A price adjustment shall be determined according To an adjusted Wafer value
that is equal to the actual price adjusted by the percentage change from the
averse tot yield, subject to the Allowance Range. For example
(i) If the average Yield rate is 70% in the case of a Product with
an average lot yield of 80%, there shall be no value adjustment
(ii) If the average Yield rate is 50% for that Product and the
current price is $1,000, the adjusted value shall be ((average lot yield-
(allowable yield deviation)) - yield rate)% * 1000= ((80-(20))-50)%*1000= $
100.00 to Centillium.
(iii) If the yield is 95% in the above example, then (95-
(80+10))%*1000 = $ 50.00 to MELA.
(iv) The Established Standard Yield will be reviewed in every
quarterly strategic business review and mutually agreed upon to apply for the
following quarter and placed in Exhibit D.
(v) Centillium Communications, Inc. shall have the option of
obtaining a credit or prompt refund of the amount of any adjustments. For the
purposes of this Section 3.8(f), the following definitions apply:
"Wafer Lot" see Exhibit C.
"Yield" shall mean electrically good 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 so long as MELA uses best efforts to optimize the
use and coverage of silicon on a Wafer)
NOTE: This section will take effect after 200 wafers of qualified product
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PART IV
COMPENSATION
4.1 Purchase Price. The price of the Wafers shall be determined from time
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to time by agreement. The price shall be adjusted according to Section 3.9(f).
The fixed price for any quarter will be reviewed during the last month of the
previous quarter and mutually agreed to by the parties in good faith. For
example, the Q2 (May - July) price will be finalized by March. If an agreement
cannot be made, the current price will continue to be valid for the products
already ordered.
4.2 Payment. MELA will invoice Centillium Communications, Inc. or its
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designees acceptable to MELA (the "payer"), for example Mitsubishi International
Corn oration (MIC), as specified in the relevant Purchase Order. Nothing in this
section shall be construed to release or discharge Centillium of its payment
obligation to MELA, and as such Centillium guarantees payment of all sums by
designees which MELA has agreed to invoice. Except as otherwise agreed in
writing by the parties, the payer shall authorize payment to MELA the net
purchase price, after yield adjustment, in US dollars within (15) days of
shipment from MELA. Once payment is authorized actual payment will occur within
(30) days of shipment. Past due invoices of MELA to the payer shall bear
interest at the rate of 1.5% per month, however, this payment can be delayed
without charge if a quality or other process issue causes a delay but not in
excess of the maximum lawful rate, until paid in full. If the due date of the
invoice of MELA is not a business day, the payer shall pay MELA on the next
business day following such due date. MELA may submit invoices for Wafers not
earlier than the date of Wafer shipment to Centillium Communications, Inc.
Payment shall be in United States dollars unless otherwise agreed. For masks
tooled by MELA hereunder, MELA may submit mask-tooling invoices with the
prototype lot.
4.3 Taxes. Purchase prices shall be inclusive of all taxes and customs
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duties, and MELA shall pay and be liable for all taxes and duties imposed by any
Taxing jurisdiction in "Country of Origin" or at the location of fabrication.
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PART V
WARRANTY AND DISCLAIMER; LIABILITY
5.1 LIMITED WARRANTY. Products sold by MELA are warranted to conform to
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specifications therefor at the time of delivery to Centillium and to remain free
from defects in workmanship and material for a period of twelve(12) months from
the date of shipment by MELA. Any products which fail to meet either such
warranty shall, at MELA's option, either be repaired or replaced by MELA at no
charge to Centillium or MELA shall issue a credit therefor in the amount paid by
Centillium on the said invoice. MELA's warranty obligation shall be limited
solely to such repair, replacement or credit. Such obligation shall be
conditioned upon receipt by MELA of notice of any alleged non-conformance to
specifications within thirty (30) days after delivery to Centillium and of any
alleged defect in material or workmanship within thirty (30) days after
discovery. Products which MELA consents or directs in writing to be returned
shall be returned to MELA, freight prepaid, F.O.B. MELA's facility in Sunnyvale,
California or other destination directed by MELA. Without limitation, MELA shall
be responsible for any costs associated with the removal of the Products from
items into which such Products have been integrated by Centillium (or other
third parties), MELA's warranty shall only apply if the products have not been
altered or repaired other than with authorization from MELA and according to its
approved procedures, the products have not been subjects to misuse, abuse,
improper installation, misapplication, maintenance, neglect or accident, the
products have not been damaged by excessive physical or electrical stress and
the products have not had their serial numbers, or other markings, if any,
altered, defaced or removed. All Products or parts determined to be defective
shall become the property of MELA upon replacement, and MELA reserves the right
to utilize refurbished parts to repair or replace the warranted products.
Warranty repairs or warranty replacements shall be subject to this warranty for
the longer of (a) ninety (90) days following shipment of the repaired/replaced
products, or (b) the remainder of the original warranty for the defective
product which has been repaired or replaced.
THE FOREGOING WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, EXPRESS
OR IMPLIED, INCLUDEING BUT NOT LIMITED TO ANYIMPLIED WARRANTY OK
MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE, COURSE OF DEALING OR USAGE
OF TRADE. MELA SHALL HAVE NO RESPONSIBILITY FOR ANY PARTICULAR APPLICATION MADE
OF ANY PRODUCT.
LIMITATION OF LIABILITY. UNDER NO CIRCUMSTANCE SHALL MELA OR ANY OF ITS
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AFFILIATES BE LIABLE TO CENTILLIUM OR ANY OTHER PERSON OR ENTITY FOR ANY
SPECIAL, PUNITIVE, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER BASED
UPON LOST GOODWILL, LOST PROFITS, WORK STOPAGE, PRODUCT FAILURE, IMPAIRMENT OF
OTHER GOODS OR OTHERWISE AND WHETHER ARISING OUT OF BREACH OF WARRANTY, BREACH
OF CONTRACT, NEGLIGENCE, TORT OR OTHERWISE.
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PART VI
INTELLECTUAL PROPERTY INDEMNITY
6.1 Indemnification by Centillium Communications. Inc.. Centillium
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Communications, Inc. agrees to defend MELA and its Affiliates against any third-
party actions or claims arising out of the manufacture, use, sale, offer for
sale, or importation of Products and brought against MELA and its Affiliates to
the extent based upon a claim that Centillium's specifications; technology; or
information made available to MELA, or the product thereof infringes any
worldwide patent, trademark or copyright, trade secret or similar intellectual
property right of any third party, and Centillium Communications, Inc. agrees to
purchase any work-in-process for Products and to pay any settlement mounts or
damages awarded against MELA and its Affiliates (including reasonable attorneys
fees and court costs) to the extent based upon such a claim; provided that MELA
and its Affiliates provides Centillium Communications, Inc. (i) prompt notice
thereof, (ii) reasonable assistance in connection with the defense thereof (at
Centillium Communications, Inc.'s expense excluding MELA and its Affiliates
employee expense), and (iii) full control of the defense and settlement thereof.
Centillium Communications, Inc. shall not settle any such claim in a manner that
has a material adverse effect on MELA and its Affiliates without MELA and its
Affiliates prior written consent. Centillium Communications, Inc. agrees to keep
MELA and its Affiliates apprised of the progress of any action or claims covered
by this Section 6.1. Notwithstanding the foregoing, Centillium Communications,
Inc.'s obligation to indemnify MELA and its Affiliates under this Section 6.1
shall not apply to any actions or claims described in Section 6.2 below.
6.2 Indemnification by MELA.
-----------------------
(a) MELA agrees to defend Centillium Communications, Inc. and/or its
Associated Companies against any third-party actions or claims arising out of
the manufacture, use, sale, offer for sale, or importation of Products and
brought against Centillium Communications, Inc. and/or its Associated Companies
to the extent based upon a claim that the use of any Process used by MELA or any
technology or information provided by MELA under this Agreement infringes or
misappropriates (directly or indirectly, such as, without limitation, through
the sale or importation of a wafer manufactured by any such Process) any
worldwide patent, copyright, trade secret or other intellectual property right
of any third party, and agrees to pay any settlement amounts or damages awarded
against Centillium Communications, Inc. and/or its Associated Companies
(including reasonable attorneys fees and court costs) to the extent based upon
such a claim; provided that Centillium Communications, Inc. and/or its
Associated Companies provides MELA (i) reasonably prompt notice thereof, (ii)
reasonable assistance in connection with the defense thereof (at MELA's expense
excluding Centillium Communications, Inc. and/or Associated Company employee
expense), and (iii) allows MELA full control of the defense and settlement
thereof. MELA shall not settle any such claim in a manner that has a material
adverse effect on Centillium Communications, Inc. without Centillium
Communications, Inc.'s prior written consent. MELA agrees to keep Centillium
apprised of the progress of any action covered by this Section 6.2.
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(b) MELA shall at all times have the right to: (i) obtain appropriate
licenses to, or (ii) modify, the Process provided that the resulting Product
complies with the specifications set forth in Exhibit F and subject to
Centillium Communications, Inc.'s right to approve such changes in advance, such
pre-approval not to be unreasonably withheld.
(c) Exclusions. MELA shall not be obligated to indemnify and hold
----------
harmless Centillium Communications, Inc. where the infringement is caused by:
(i) the use of Products by Centillium Communications, Inc. in combination with
other circuits components, components, devices or products if both the
infringement would not have occurred but for such combination and could have
been avoided by a different commercially viable combination and such combination
is not reasonably necessary to use the Product for its intended purpose; (ii)
use of the Products by Centillium Communications, Inc. and/or its Associated
Companies in applications or environments for which Products were not designed;
or (iii) modifications to the Products by Centillium Communications, Inc. and/or
is Associated Companies if such infringement would have been avoided absent such
modifications, unless such modifications were authorized by MELA.
6.3 Entire Liability. THE FOREGOING STATES EACH PARTY'S ENTIRE LIABILITY
----------------
AND OBLIGATION (EXPRESS, STATUTORY, IMPLIED OR OTHERWISE) UNDER THIS AGREEMENT
WITH RESPECT TO INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY. IN NO EVENT
SHALL MELA'S LIABILITY PURSUANT TO SECTION 6.2 ARISING OUT OF ANY INFRINGEMENT
CLAIM EXCEED THE AMOUNT PAID OR PAYABLE BY CENTILLIUM COMMUNICATIONS, INC.
HEREUNDER FOR THE PRODUCTS THAT ARE THE SUBJECT OF SUCH CLAIM.
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PART VII
GENERAL PROVISIONS
7.1 Confidentiality. (5 years)
(a) Confidential Information. "Confidential Information" means any
------------------------
technical data, trade secret, know-how, or other information disclosed by any
party (including the Associated Companies) hereunder, either directly or
indirectly, in writing, orally, by drawing or by inspections, and which shall be
marked by the disclosing party as "Confidential" or "Proprietary". If such
information is disclosed orally, through demonstration or by inspection, in
order to be deemed Confidential Information, it must be specifically designated
as being of a confidential nature at the time of disclosure and confirmed in
writing to be received by the receiving party within ten (10) days of such
disclosure.
(b) Exclusions. Notwithstanding the foregoing, Confidential
Information shall not include information which:
is known to the receiving party at the time of disclosure or becomes known
to the receiving party without breach of this Agreement;
is or becomes publicly known through no wrongful act of the receiving party
or any affiliate of the receiving party;
is rightfully received from a third party (excluding the Associated
Companies) without restriction on disclosure;
is independently developed by the receiving party or any of its affiliates
by persons who had no access to the information;
is furnished to any third party by the disclosing party without restriction
on its disclosure; or
is approved for release upon a prior written consent of the disclosing
party.
(c) Compelled Disclosure. Notwithstanding the foregoing, a receiving
--------------------
party may disclose Confidential Information if such Confidential Information is
disclosed pursuant to judicial order, requirement of a governmental agency or by
operation of law; provided, however, that the receiving party shall provide
prior notice to the disclosing party and thereafter use reasonable commercial
efforts to assist the disclosing party in preventing or controlling such
compelled disclosure.
(d) Nondisclosure. The receiving party agrees that it will not
-------------
disclose any Confidential Information to any third party unless that third party
agrees to be bound to the confidentiality obligations stated in this part VII
and will not use Confidential Information of the disclosing party for any
purpose other than for the performance of obligations hereunder during the term
of this Agreement. The receiving party further agrees that Confidential
Information shall remain the sole property of the disclosing party and that it
will take all reasonable precautions to
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CONFIDENTIAL
prevent any unauthorized disclosure of Confidential information by its employees
and independent contractors. No license shall be granted by the disclosing party
to the receiving party with respect to Confidential Information disclosed
hereunder unless otherwise expressly provided herein. Each party will disclose
the other's Confidential Information only to those of its employees and
personnel of Affiliates that have a need to know and who are informed that such
information is confidential.
(e) Return of Confidential Information. After expiration or
----------------------------------
termination of this Agreement upon the request of the disclosing party the
receiving party will promptly return all Confidential Information furnished
hereunder and all copies thereof, and the receiving party will certify that al
such confidential information has been returned or destroyed.
(f) Publicity. The parties agree that all publicity and public
---------
announcements concerning the formation and existence of this Agreement shall be
jointly planned and coordinated by and among the parties. Neither party shall
disclose any of the provisions of this Agreement, the existence of this
Agreement, nor that the parties are doing business with one another to any third
party without the prior written consent of the other party. Centillium
Communications, Inc. will be responsible for all communications with Centillium
Communications, Inc.'s customers concerning the subject matter hereof, and MELA
agrees to forward to Centillium Communications, Inc. any communications it
receives from Centillium Communications, Inc.'s customers. Notwithstanding the
foregoing, any party may disclose information concerning this Agreement as
required by the rules, orders, regulations, subpoenas or directives of a court,
government or governmental agency, after giving prior notice to the other
parties and either party may disclose this Agreement to its attorneys,
accountants or like consultants that have a need to know or to potential
investors or potential acquiring companies.
(g) Remedy for Breach of Confidentiality. If a party breaches any of
------------------------------------
its obligations with respect to confidentiality and unauthorized use of
Confidential Information hereunder, the non-breaching party shall be entitled to
equitable relief to protect its interest therein, including but not limited to
injunctive relief, as well as money damages.
7.2 Term and Termination. This Agreement shall remain in force for five (5)
--------------------
years from the time the first product is released to production by Centillium
Communications, inc. unless it is terminated earlier as provided in this
Agreement. At the end of five (5) years, this Agreement will be extended for
another one (1) year under the same terms and conditions provided herein unless
either party gives notice of termination twelve (12) months prior to the
expiration date. Notwithstanding the foregoing, all existing orders and the
provisions of Part V, VI, and Section 7.6 of Part VII (Export Controls) shall
survive any termination or expiration of this Agreement. The obligations of
confidentiality under Article 7.1 of Part VII shall last during the specific
period set forth in Article 7.1 of Part VII.
(a) Subject to Section 7.2(b), either party may terminate this
Agreement with immediate effect, at its sole discretion, upon giving written
notice to the other party, in case:
the other party, defaults in the performance of any material obligation
hereunder, and if any such default is not corrected within ninety (90) days
after the defaulting party receives written notice of such default from the non-
defaulting party,
Page 17 of 30
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the business of the other party as a commercial enterprise ceases, or
The other party files a petition in bankruptcy, or is adjudicated bankrupt,
or makes a general assignment for the benefit of creditors, or becomes
insolvent, or is otherwise unable to meet its business obligations for a period
of three (3) consecutive months.
(b) In the event that MELA terminates this Agreement pursuant to
Section 7.2(a) above, MELA agrees to upon request negotiate in good faith with
Centillium customers for the continued supply of Wafers. Centillium
Communications, Inc. agrees to provide MELA with a list of such customers
reasonably prior to the occurrence of the events specified in Section 7.2(a)
above.
7.3 Force Majeure. The parties shall not be liable to one another for
-------------
failure to perform any part of this Agreement except for any payment obligation
when such failure is due to fire, flood, strikes, labor troubles or other
industrial disturbances, inevitable accidents, war (declared or undeclared),
embargoes, blockades, legal restrictions, governmental regulations or orders,
riots, insurrections, year 2000 computer problems or any cause beyond the
control of such party. However, the party so prevented from performance shall
use commercially reasonable efforts to resume performance, and the parties shall
proceed under this Agreement when the causes of such nonperformance have ceased
or have been eliminated.
7.4 Assignment. The parties shall not assign or transfer this Agreement, in
----------
whole or in part, or any right or obligation hereunder to any third party
without the prior written consent of the other party, provided that either party
shall have the right to assign this Agreement to an entity that acquires all or
substantially all of its assets, without the consent of the other party.
7.5 Governing Law; Disputes.
------------------------
(a) Except as hereinafter provided, all disputes or controversies
arising out of or in any manner relating to this Agreement which the parties do
not resolve in good faith within ten days after either party notifies the other
of its desire to arbitrate such disputes or controversies shall be settled by
arbitration by a single arbitrator in accordance with the then standard
prevailing commercial rules, as modified or supplemented by this article, of the
American Arbitration Association("AAA"). The arbitration shall be held in Santa
Xxxxx County, California. The arbitration award shall be in writing and shall
specify the factual and legal bases of such award. The arbitration award shall
be final and binding, and a judgment consistent therewith may be entered by any
court of competent jurisdiction. The parties agree that the arbitration award
shall be treated confidentially, and the parties shall not, except as otherwise
required by law or court or, disclose the arbitration award to any third party,
excluding personnel I their affiliated companies and their attorneys and
accountants with a need to know, provided that such recipients agree to be bound
by the same restrictions as are contained in this Agreement. The arbitrator
shall not have the power to render an award of punitive damages. To the extent
of any conflict, this article shall supersede and control AAA rules.
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(b) Nothing in this article shall be construed to preclude or in any
way prohibit either party from: (1) seeking any provisional remedy, such as an
injunction or a temporary, restraining order; or (2) instituting or prosecuting
to judgment any lawsuit in any court of competent jurisdiction to collect any
money due.
(c) Except as provided in this subsection, neither party shall have
the right to take depositions or obtain discovery of documents or other
information. After the appointment of the arbitrator, the parties shall agree on
(1) a reasonable number of and schedule for depositions which the parties may
take and (2) a reasonable scope and schedule for the production of documents or
other information which is relevant to the subject matter of the arbitration. If
the parties cannot reach agreement on the number of depositions, the scope, of
production of documents or other information and the schedule therefor, the
arbitrator shall make such determination(s). All discovery shall be completed no
later than thirty (30) days prior to the arbitration hearing. The arbitrator
shall have the power to enforce any discovery agreed upon by the parties or
other wise required to be taken sanctions and penalties as can be or may be
imposed in like circumstance in a civil actions by a California Superior Court,
except the power to order the arrest or imprisonment of a person.
(d) No later than thirty (30) days prior to the arbitration hearing,
each party shall produce to the other party and the arbitrator lists of the
witnesses, documents and other information which such party intends to use at
the arbitration hearing.
7.6 Export Controls. MELA and Centillium Communications, Inc. acknowledge
---------------
that they are each subject to regulation by agencies of the U.S. and "Country of
Origin" Governments, including the U.S. Department of Commerce, which prohibit
export or diversion of certain products and technology to certain countries. Any
and all obligations of the parties to provide technical information, technical
assistance, any media in which any of the foregoing is contained, training and
related technical data (collectively, "Data") shall be subject in all respect to
such United States and "California" laws and regulation as shall from time to
time govern the license and delivery of technology and products abroad by
persons subject to the jurisdiction of the United States, including the Export
Administration Act of 1979, as amended, any successor legislation, and the
Export Administration Regulations issued by the Department of Commerce,
International Trade Administration, Bureau of Export Administration.
Without in any way limiting the provisions of this Agreement, the parties
agree that unless prior written authorization is obtained from the Bureau of
Export Administration or unless the Export Administration Regulations explicitly
permit the reexport without such written authorization, neither party will
export, reexport, or transship, directly or indirectly, the Products or any
technical data disclosed or provided to MELA, or the direct product of such
technical data, to country groups Q, S, W, Y, or Z (as defined in the Export
Administration Regulations and which currently consist of Albania, Bulgaria,
Cambodia, Cuba, the Czech Republic, Estonia, Laos, Latvia, Libya, Lithuania,
Mongolian People's Republic, North Korea, Poland, Romania, the geographic area
of the former Union of Soviet Socialist Republics, the Slovak Republic and
Vietnam, or to the People's Republic of China (excluding Taiwan), Haiti, Iran,
Iraq, Syria, Yugoslavia (Serbia and Montenegro), or to any
Page 19 of 30
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other country, as to which the U.S. Governments have placed an embargo against
the shipment of products, which is in effect during the term of this Agreement.
7.7 Notice. Any notice required or permitted to be given under this
------
Agreement shall be delivered (i) by hand, (ii) by registered or certified mail,
postage prepaid, return receipt requested, to the address of the other party
first set forth above, or to such other address as a party may designated by
written notice in accordance with this Section 7.7 by overnight courier, or
(iii) by electronic transmission with conforming letter mailed under the
conditions described in (ii). Notice so given shall be deemed effective when
received, or if not received by reason of fault of addressee, when delivered.
If to MELA, to:
MELA
Product Manager
Mitsubishi Electronics America
0000 Xxxx Xxxxxx Xxx
Xxxxxxxxx, XX 00000-0000
If to Centillium Communications, Inc., to:
Vice President of Operations and Manufacturing
Centillium Communications, Inc.
00000 Xxxxxxx Xxxx
Xxxxxxxxxx, 00000
7.8 Relationship of Parties. The relationship between Centillium
-----------------------
Communications, Inc. and MELA under this Agreement is that of independent
contractors and neither shall be, nor represent itself to be, the joint
venturer, franchiser, franchisee, partner, broker, employee, servant agent, or
representative of the other for any purpose whatsoever. No party is granted any
right or authority to assume or create any obligation or responsibility, express
or implied, on behalf of, or in the name of, another party or to bind another in
any matter or thing whatsoever.
7.9 Waiver. Should any of the parties fail to exercise or enforce any
------
provision of this Agreement or to waive any rights in respect thereto, such
waiver or failure shall not be construed as constituting a continuing waiver or
a waiver of any other right.
7.10 Severability. In the event that any provision or provisions of this
------------
Agreement shall be held to be unenforceable, the parties shall renegotiate those
provisions in good faith to be valid, enforceable substitute provisions which
provisions shall reflect as closely as possible the intent of the original
provisions of this Agreement. If the parties fail to negotiate a substitute
provision, this Agreement will continue in full force and effect without said.
7.11 Entire Agreement. This Agreement, including the Exhibits referred to
----------------
herein, contains the entire understanding of the parties, and supersedes any
prior agreement between or among the parties with respect to its subject matter.
In case of any conflicts between this Agreement
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and any purchase orders, acceptances, correspondence, memorandum, listing sheets
and other documents forming part of any order for Products, this Agreement shall
govern. This Agreement shall not be amended or modified except by written
instrument signed by the duty authorized representatives of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their duly authorized representatives or officers, effective as of the
Effective Date.
Mitsubishi Electronics America, Inc. Centillium Communications, Inc.
By: /s/ Xxxxx X. Xxxxxx By: /s/ X X Xxxxxxxxx
----------------------- -----------------------------
Name: Xxxxx Xxxxxx Name: Xxxxxxx X Xxxxxxxxx
--------------------- ---------------------------
Title: Sr. VP & GM. Systems Integration Title: VP Operations and Mnfg.
--------------------------------- --------------------------
Division, Electronics Device Group Services
---------------------------------- --------
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EXHIBITS
--------
A - Initial Process(es)
B - Production Information
C - Acceptance Criteria
D - Acceptable Yields
E - Yield Scrap Criteria
F - Specifications
G - E-test parameters
H - Work in Progress (WIP) reporting format
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EXHIBIT A
---------
INITIAL PROCESS (ES)
MELCO STANDARD "C-Si-J8" as modified for Centillium Communications, Inc.
(Vtn=0.5/V, Vtp=-0.70/V, Idsn=570A/um, Idsp=260mA/um).
Page 23 of 30
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EXHIBIT B
---------
PRODUCTION INFORMATION
Fabrication Cycle Times
-----------------------
Prototype: 32 days Cycle Time from mask generation to Centillium
Communications, Inc. provided Centillium Communications, Inc.
releases design database to MELCO 3 days before tape out. 25
days from Metal 1 to Centillium Communications, Inc.
Volume: 77 days at Centillium Communications, Inc. dock after P.O.
acceptance 30 days from Metal 1 to Centillium Communications,
Inc.(pre-qualification)
Wafers Per Lot
--------------
Prototype: 12
Volume: 25
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EXHIBIT C
---------
Acceptance Criteria: Wafers
1. 5 wafers out of a lot
2. 5 sites per wafer
3. If 5 out of 5 sites pass electrical test (ET) specification pass on
product
4. If 4 out of 5 sites pass electrical test specification choose one
more wafer.
5. If this passes electrical tests pass on lot
6. If this fails 100% test lot - inform Centillium after
disposition
7. If 3 or less sites pass electrical specifications, 100% test lot -
inform Centillium after disposition
8. No more than 3 probe marks on any I/O pad which is not on test
structure
9. No visual defects seen under 50x magnification which covers 20% of
wafer
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EXHIBIT D
---------
ACCEPTABLE YIELDS
-------------------------------------------------------------------------------
Time Ave. Lot Yield Allowance Range (+/- 20%)
-------------------------------------------------------------------------------
CT-L21DC08 60% +/- 20%
-------------------------------------------------------------------------------
CT-L21DC04 65% +/- 20%
-------------------------------------------------------------------------------
CT-L21DC01 70% +/- 20%
-------------------------------------------------------------------------------
CT-L22DT01 Undetermined (85%) +10%/-20%
-------------------------------------------------------------------------------
Note: Yield based on first 200 wafers
WAFER COST (US$)
----------------
* 500 wafers $2450
** 500 wafers Not to exceed $2280
MASK COST (US$)
---------------
Masks (NRE), 12 wafers (6 held pre-metals and 6 shipped) and superhot cycle-time
. $150,000 per design
* = less than
** = greater than
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EXHIBIT E
YIELD CRITERIA
Scrap Yield 20% of Standard yield in Exhibit D
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EXHIBIT F
SPECIFICATIONS
SPC monitoring of wafer fabrication site CSP-OPQR-16
Reliability process monitoring program CSP-OPQR-17
Packing and Transportation of wafers CSP-OPSH-1
Visual wafer inspection criteria CSP-OPQR-18
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EXHIBIT G
E-TEST PROCESS MONITORS (Minimum)
Threshold Voltages (3.3 & 2.5V process) - Vthn/Vthp
Drive Currents (3.3 & 2.5V process)- Idsn/Idsp
Ring Oscillator Frequency
Resistance - Metal, Via, Contacts, silicides
Breakdown voltages
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EXHIBIT H
---------
WORK IN PROCESS (WIP) REPORTING FORMAT (MINIMUM DATA SET)
MELCO DATA MELA DATA
------------ ---------
1. MELCO fabrication location 1. Requested Ship Date
2. Date and time file sent (PST) 2. Forecast Ship date
3. Customer or MELCO Devices Number 3. Ship confirmation date
4. Process Stage (10 defined locations 5 at metals 5 pre-metals)
5. Lot number
6. Wafer quantity into process stage
------------------------------------------------------------------------
Centillium Mitsubishi Quantity Due date to Centillium
Part # Part # Centillium request Dock
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------
Lot # # of Wafers Wafer start WIP Wafer
Date location Completion
date
------------------------------------------------------------------
------------------------------------------------------------------
-------- ---------------------------------------------------------
Shaded areas are provided by MELA
Page 30 of 30