GALLIUM ARSENIDE AND THIN FILM
SUPPLY AND SERVICES AGREEMENT
THIS GALLIUM ARSENIDE AND THIN FILM SUPPLY AND SERVICES
AGREEMENT ("Agreement"), dated as of October 31, 1997 ("Effective Date"), is
made by and among XXXXXXX-XXXXXXX COMPANY, a California Corporation
("Xxxxxxx-Xxxxxxx"); STELLEX MICROWAVE SYSTEMS, INC., formerly known as X-X TSMD
Inc., a California corporation and a wholly-owned subsidiary of Xxxxxxx-Xxxxxxx
("X-X TSMD"); and TSMD ACQUISITION CORP., a Delaware corporation ("TSMD
Acquisition").
WHEREAS, the parties have entered into that certain Stock
Purchase Agreement, dated as of August 29, 1997 (the "Purchase Agreement"),
whereby TSMD Acquisition has agreed to purchase, and Xxxxxxx-Xxxxxxx has agreed
to sell, all of the outstanding stock of X-X TSMD; and
WHEREAS, Xxxxxxx-Xxxxxxx operates a gallium arsenide
and thin film fabrication facility (the "Facility"); and
WHEREAS, X-X TSMD's business relies on a steady supply
of parts processed by the Facility; and
WHEREAS, in partial consideration of the Purchase Agreement,
Xxxxxxx-Xxxxxxx has agreed to supply X-X TSMD with a steady supply of gallium
arsenide and thin film parts and services as provided herein; and
WHEREAS, the execution of this Agreement is a condition to the
closing of the purchase and sale of the outstanding stock of X-X TSMD under the
Purchase Agreement;
NOW, THEREFORE, for and in consideration of the foregoing and
of the covenants, conditions, undertakings and mutual promises hereinafter set
forth, it is agreed by and among the parties as follows:
1. DEFINITIONS
For all purposes of this Agreement, except as otherwise
expressly provided:
(a) the terms defined in this Section 1 have the meanings
assigned to them in this Section 1 and include the plural as well as the
singular;
(b) all references in this Agreement to designated
"Sections," "Paragraphs," and other subdivisions are to the designated
Sections, Paragraphs, and other subdivisions of the body of this Agreement;
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* Indicates that certain material has been omitted pursuant to a request for
confidential treatment. Such material is contained in a copy of this document
provided to the Securities and Exchange Commission.
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(c) pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms; and
(d) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Section, Paragraph, or other subdivision.
As used in this Agreement and the Exhibits delivered pursuant
to this Agreement, the following definitions shall apply:
"Affiliate" means a Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, a specified Person.
"Closing" means the consummation of the purchase and
sale of stock under the Purchase Agreement.
"Conditions of Purchase" means the Conditions of Purchase Form
(Form PAR-1012EG-PA (01/95)), modified as shown on Exhibit H.
"Effective Date" means the date of Closing.
"Gallium Arsenide Part" means a wafer, die or dice comprising
one or more layers of gallium arsenide, on which is implemented one or more
transistors or diodes.
"Intellectual Property Rights" means all industrial and
intellectual property rights, including, without limitation, patents, patent
applications (pending or otherwise), patent rights, copyrights, computer
firmware and software (existing in any form), Know-How, Trade Secrets,
proprietary processes, inventions and formulae.
"Know-How" means any information, including, but not limited
to, invention records, research and development findings, records and reports,
experimental and engineering reports, pilot designs, production designs,
production specifications, raw material specifications, quality control reports
and specifications, drawings, photographs, models, tools, parts, algorithms,
processes, methods, market and competitive analysis, or other information,
whether or not considered proprietary or a Trade Secret.
"Lead Time" means the time between Xxxxxxx-Xxxxxxx'x receipt
of a specific authorization to fulfill a Requirement for a Part and the delivery
of the Part. Lead time includes queue time and factory cycle time.
"Operations Council" means the Operations Council
described in Section 12.1.
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"Part" means a Gallium Arsenide Part or a Thin Film Part.
"Process Costs" means the process costs associated with
maintaining the Facility as described on Exhibit B. Actual expenditures of
Process Costs for the first six months of 1997 are also shown on Exhibit B.
"Requirements" means X-X TSMD's requirements for Parts as
specified on the forecast form attached as Exhibit A and as modified from time
to time in accordance with the terms and conditions of this Agreement.
"Services" means services related to the manufacture of the
Parts, including, but not limited to research and development efforts.
"Thin Film Part" means any component, interconnect, wafer,
substrate, die or dice comprising one or more layers of thin film material such
as tantalum nitride or gold deposited on a ceramic.
"Trade Secrets" means any formula, pattern, device or
compilation of information which gives an opportunity to obtain an advantage
over competitors who do not know or use it, including, but not limited to,
formulas for chemical compounds, a process of manufacturing, treating or
preserving materials, a pattern for a machine or any forms, plans, drawings,
specifications, customer lists, marketing and competition analysis and project
management, inventory and cost control systems and techniques.
"TSMD Forecast Form" means a form that reasonably identifies a
projected delivery schedule and contains the information described on Exhibit A.
"TSMD's Share of Process Costs" means the amount paid by X-X
TSMD to reimburse Xxxxxxx-Xxxxxxx for the Process Costs associated with the
manufacture of Parts for X-X TSMD as calculated in accordance with section 6.2
of this Agreement and as illustrated on Exhibit D.
"TSMD Share Ratio" means X-X TSMD's usage of the Facility as
calculated in accordance with Exhibit C.
"Unit Prices" means the prices charged for Parts set
forth on Exhibit E.
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2. SUPPLY, TERM
2.1 Supply and Purchase.
For the term of this Agreement, X-X TSMD shall purchase, and
Xxxxxxx-Xxxxxxx shall supply, Parts and Services according to the terms and
conditions set forth herein. If any Requirements under this Agreement may be
considered subcontracted requirements that are subject to the Federal
Acquisition Regulations (FAR), Xxxxxxx-Xxxxxxx agrees to provide cost and
pricing information regularly maintained in its business to X-X TSMD to
establish cost and pricing reasonableness.
2.2 Term.
This Agreement shall commence on the Effective Date and shall
continue until December 31, 2000.
2.3 Termination by X-X TSMD Without Cause.
This Agreement may be terminated by X-X TSMD without cause at
any time by notice to Xxxxxxx-Xxxxxxx given one year prior to such termination
date. In the event that X-X TSMD gives such a notice, the termination shall be
effective on the date specified in such notice. Payment of Process Costs and
research and development costs shall be prorated to the effective date of such a
termination.
2.4 Termination With Cause.
If any party commits a material breach of this Agreement and
does not correct such breach within thirty (30) days after written notice from
the non-breaching party, the non-breaching party may terminate this Agreement by
written notice to that effect. Such termination will not prejudice or limit any
other rights or remedies available to the non-breaching party.
2.5 Termination Because of Government Action.
If X-X TSMD cannot obtain all or any part of a reimbursement
from the government, or X-X TSMD must refund or credit the government, for a
Service or Part provided by Xxxxxxx-Xxxxxxx, X-X TSMD may terminate this
Agreement with respect to all Requirements relating to government acquisition
upon thirty (30) days written notice to Xxxxxxx-Xxxxxxx, provided that X-X TSMD
has first (a) made a good faith effort to defend the disputed pricing of the
Service or Part in question, and (b) offered Xxxxxxx-Xxxxxxx a reasonable
opportunity to cure the deficiency. Upon such termination, the parties will
equitably adjust any payments due Xxxxxxx-Xxxxxxx under this Agreement. Any
termination under this Section 2.5 shall not constitute a default by X-X TSMD or
a termination by reason of X-X TSMD's election or default for purposes of
Section 11.2.
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2.6 Maintenance of Facility and Processes.
For the term of this Agreement, Xxxxxxx-Xxxxxxx shall maintain
the Facility and the processes as necessary to manufacture the Parts listed on
Exhibit E.
3. RESEARCH AND DEVELOPMENT SERVICES.
3.1 Time and Materials.
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3.2 Research and Development Authorization.
X-X TSMD shall authorize research and development projects in
the form of specific purchase orders for such projects as follows:
(i) At least 60 days prior to the start of each calendar
quarter beginning after January 1, 1998, X-X TSMD will give direction to
Xxxxxxx-Xxxxxxx for the research and development projects to be performed during
that quarter. This direction will provide technical objectives, schedule
constraints, and spending limitations for each project.
(ii) Within 2 weeks after providing the research and
development direction to Xxxxxxx-Xxxxxxx, X-X TSMD and Xxxxxxx-Xxxxxxx will
review the objectives and agree upon any modifications as necessary. The result
of this review will be a written Statement of Work ("SOW") for each research and
development project. This SOW shall be completed at least 30 days before the
start of each quarter.
(iii) From November 1 until December 31, 1997, Xxxxxxx-
Xxxxxxx shall perform those research and development services specified in a
SOW which X-X TSMD will prepare and deliver by November 8, 1997.
(iv) X-X TSMD may cancel at any time an authorization to
perform research and development services by reasonable notice to
Xxxxxxx-Xxxxxxx.
3.3 Monthly Review.
Xxxxxxx-Xxxxxxx shall provide a monthly review of research and
development technical progress and projections to W-
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* Indicates that certain material has been omitted pursuant to a request for
confidential treatment. Such material is contained in a copy of this document
provided to the Securities and Exchange Commission.
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J TSMD for each month in which such a review has not been presented at a
meeting of the Operations Council.
3.4 Diligence.
In performing the research and development projects authorized
by X-X TSMD, Xxxxxxx-Xxxxxxx shall act with at least that degree of care and
diligence that it devotes to its own research and development projects.
3.5 Minimum Payment.
X-X TSMD shall pay Xxxxxxx-Xxxxxxx, for research and
development, a minimum of $80,000 for the period between November 1, 1997 and
December 31, 1997. For the period between January 1, 1998 and December 31, 1998,
X-X TSMD shall pay Xxxxxxx-Xxxxxxx a minimum payment of $150,000 per quarter and
a total of $800,000 for the year. Thereafter, for each calendar quarter during
which the Agreement continues in effect, X-X TSMD shall pay for research and
development services a minimum of $100,000 for each calendar quarter during
1999, and $75,000 for each calendar quarter during 2000. Payment shall be made
net 30 days from the date of invoice. All material and service costs related to
authorized research and development projects, including the costs of mask
fabrication and the processing of developmental wafers and substrates, may be
charged against these minimum payments. All costs may be subject to audit by X-X
TSMD. Xxxxxxx-Xxxxxxx will submit monthly invoices for research and development
services on a monthly basis.
3.6 X-X TSMD Employees.
X-X TSMD may assign, subject to Xxxxxxx-Xxxxxxx'x reasonable
approval, one or two individuals to work with Xxxxxxx-Xxxxxxx employees in the
Thin Film facility on research and development projects described in a SOW.
Salary and benefits for these individuals will be paid by X-X TSMD, but they
shall work under the direction of Xxxxxxx-Xxxxxxx management. The parties shall
cooperate to establish any reasonably required agreements or procedures for such
X-X TSMD employees.
3.7 Additional Assistance.
Xxxxxxx-Xxxxxxx recognizes that X-X TSMD may ultimately
establish its own facility for Thin Film products. Accordingly, Xxxxxxx-Xxxxxxx
will provide reasonable assistance to X-X TSMD in establishing a separate
facility during the term of the Agreement. This assistance will include
recruiting employees for X-X TSMD and training employees at X-X TSMD's Thin Film
facility.
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4. FORECASTS, REQUIREMENTS, FULFILLMENT
4.1 Forecasts.
X-X TSMD shall provide Xxxxxxx-Xxxxxxx a rolling six (6) month
Requirements forecast for Parts on a TSMD Forecast Form, updated monthly. The
TSMD Forecast Form shall be substantially in the form attached hereto as Exhibit
A. The TSMD Forecast Form shall specify the quantity of devices by product type
for GaAs Parts and the quantity of blanks by process type, part number (when
available) and blank size for Thin Film Parts. Such forecast is for X-X TSMD's
convenience only and shall in no way create an obligation on X-X TSMD's part to
meet such forecast; provided, however, that Xxxxxxx-Xxxxxxx shall not be
obligated to meet lead times for the amount of Parts in a specific authorization
that exceeds by more than fifteen (15) percent the quantity of such devices
specified in a Forecast Form.
4.2 Specific Authorization.
X-X TSMD agrees to provide Xxxxxxx-Xxxxxxx specific X-X TSMD
authorization to fulfill Requirements in the form of a purchase order for Parts
substantially in the form attached hereto as Exhibit H. Such specific X-X TSMD
authorization shall become effective upon receipt by Xxxxxxx-Xxxxxxx. The terms
of Conditions of Purchase attached to the purchase order shall govern any
purchase of Parts under this Agreement unless inconsistent with this Agreement,
in which case this Agreement controls.
4.3 Minimum Quantities.
(i) For any Gallium Arsenide Part ordered by a specific X-X
TSMD authorization, X-X TSMD shall be obligated to purchase, whichever is
greater, (a) the number of units of such Part specified in the authorization, or
(b) twenty-five (25) units of such Part.
(ii) For any Thin Film Part ordered by a specific X-X TSMD
authorization, X-X TSMD shall be obligated to purchase, whichever is greater,
(a) the number of units of such Part specified in the authorization, or (b) the
number of units actually created from the processing of the minimum number of
substrate blanks necessary, at Xxxxxxx-Xxxxxxx'x published process yields, to
produce the number of Parts specified in the authorization. Xxxxxxx-Xxxxxxx
shall publish each quarter a table showing expected yields for each Thin Film
process.
4.4 Cancellation of an Authorization.
In the event of a termination or a cancellation of a
specific X-X TSMD authorization to fulfill Requirements under
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this Agreement, Xxxxxxx-Xxxxxxx shall undertake reasonable efforts to cancel all
applicable subcontracted materials/services and reduce component inventory
through return for credit programs or allocate components for alternate programs
if applicable, at the lowest possible cost to X-X TSMD.
4.5 Compensation for Cancellation.
In the event of a termination or a cancellation of a specific
X-X TSMD authorization to fulfill Requirements under this Agreement, and/or
discontinuance of Requirement or excess material created by X-X TSMD initiated
engineering change, X-X TSMD shall compensate Xxxxxxx-Xxxxxxx for Requirements
and material inventory as follows:
(i) the contract price of all duly authorized and
completed Requirements already furnished to X-X TSMD or in
Xxxxxxx-Xxxxxxx'x possession;
(ii) the cost of X-X TSMD unique material inventory, whether
in raw form or work in process, and not returnable to the vendor or usable for
other Requirements or other customers;
(iii) the cost of X-X TSMD unique material on order
which cannot be cancelled;
(iv) any vendor cancellation charges incurred with respect to
X-X TSMD unique material cancelled or returned to the vendor, or otherwise set
forth in addenda to this Agreement; and
(v) an administrative charge of 12.5% of the costs
described in (ii) and (iii) above.
5. DELIVERY
5.1 On-Time Delivery.
Xxxxxxx-Xxxxxxx shall target 100% on time delivery, defined as
delivery of Requirements by Xxxxxxx-Xxxxxxx within a window of ten (10) days
early and zero days late of the delivery date specified in a purchase order.
Xxxxxxx-Xxxxxxx shall not exceed the Lead Times specified on Exhibit F for the
Parts listed therein unless the quantity of devices ordered exceeds by more than
15% the quantity forecasted, in which case Xxxxxxx-Xxxxxxx will deliver such
additional quantity within a reasonable period. Xxxxxxx-Xxxxxxx will make
reasonable efforts to minimize lead times on engineering orders by reducing or
eliminating queue.
5.2 FOB Point.
The FOB point shall be Palo Alto, California in the absence of
a documented mutual agreement to some other FOB term
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with the issuance of any specific X-X TSMD authorization to fulfill
Requirements.
5.3 Schedule Changes.
Xxxxxxx-Xxxxxxx shall make reasonable efforts to comply with
any requested schedule improvements/changes, without cost impact.
Xxxxxxx-Xxxxxxx shall be expected to accept X-X TSMD requests for delays in
delivery schedule, with rescheduling of ship dates to within thirty (30) days of
the original delivery schedule, without cost impact, in the absence of a
documented mutual agreement to some other definition of flexibility in delivery
re-scheduling with the issuance of any specific X-X TSMD authorization to
fulfill Requirements.
5.4 Delays.
Upon learning of any potential delivery delays,
Xxxxxxx-Xxxxxxx shall notify X-X TSMD as to the cause and extent of such delay.
If Xxxxxxx-Xxxxxxx fails to make deliveries at the specified time and such
failure is caused by Xxxxxxx-Xxxxxxx, Xxxxxxx-Xxxxxxx shall, at no cost to X-X
TSMD, employ accelerated measures such as material expediting fees, premium
transportation costs, or labor overtime required to meet the specified delivery
schedule.
6. PAYMENT FOR PARTS.
6.1 Payment.
For the supply of Parts under this Agreement, X-X TSMD agrees
to pay X-X TSMD's Share of Process Costs and the Unit Prices determined in
accordance with this section. Payment for research and development costs is set
forth in Section 3.5
6.2 Process Costs.
X-X TSMD shall pay to Xxxxxxx-Xxxxxxx, TSMD's Share of Process
Costs calculated by multiplying the Process Costs by the TSMD Share Ratio as
illustrated on Exhibit D. For the period from November 1, 1997 through December
31, 1997, TSMD's Share of Process Costs will be $366,666.67. For 1998, TSMD's
Share of Process Costs will be $2.2 million. On January 1, 1999, TSMD's Share of
Process Costs shall be adjusted for each succeeding six month period as follows:
(i) For each six month period beginning on January 1 or July 1
(Adjustment Date), TSMD's Share of Process Costs shall be calculated by
multiplying the actual expenditure of Process Costs by the TSMD Share Ratio for
the six month period ending six months before the Adjustment Date, provided that
the resulting TSMD Share may not be ten percent more or less than TSMD's Share
of Process Costs for the six months preceding the Adjustment
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Date. For the six month period beginning on January 1, 1999, TSMD's Share of
Process Costs shall not be 10 percent more or less than $1.1 million.
(ii) Ninety days before each Adjustment Date, Xxxxxxx-Xxxxxxx
shall provide X-X TSMD with a report calculating the actual expenditure of
Process Costs and the actual X-X TSMD Share Ratio for the six month period
ending six months before the Adjustment date. This report may be subject to
audit by X-X TSMD.
6.3 Unit Prices.
For each Part on Exhibit E, X-X TSMD shall pay the Unit Price
set forth therein. The Unit Prices set forth on Exhibit E are guaranteed through
January 1, 1999. Thereafter, Unit Prices may be adjusted by no more than 10% for
each succeeding year if such adjustment is justified by cost data supplied by
Xxxxxxx-Xxxxxxx. Such cost data is subject to audit. For Parts not listed on
Exhibit E, the parties will negotiate Unit Prices. Xxxxxxx-Xxxxxxx shall propose
Unit Prices for such Parts and the basis for such proposal will be subject to
audit.
6.4 Minimum Payment Obligation.
For 1998, X-X TSMD's payments to Xxxxxxx-Xxxxxxx for research
and development costs, Process Costs and Unit Prices shall total at least $5.8
million.
6.5 Date.
X-X TSMD's Share of Process Costs shall be paid on a pro rata
basis monthly. Unit Prices shall be paid net 30 days from the date of invoice.
7. QUALITY
7.1 Standards.
Xxxxxxx-Xxxxxxx shall provide the Requirements in strict
accordance with the quality requirements, standards and expectations as set
forth in Exhibit G to this Agreement.
8. ENGINEERING CHANGES AND PROCEDURES
8.1 Engineering Changes submitted by X-X TSMD.
X-X TSMD may submit engineering changes for incorporation into
the Requirements. Such change orders will include reasonable documentation to
permit an investigation of the impact of the engineering change. Xxxxxxx-Xxxxxxx
will review the engineering change and report to X-X TSMD within ten (10)
working days. If any such change affects the price,
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delivery, or quality performance of the affected Requirements, an reasonable
adjustment will be negotiated between Xxxxxxx-Xxxxxxx and X-X TSMD prior to
implementation of the change.
8.2 Changes requested by Xxxxxxx-Xxxxxxx.
Xxxxxxx-Xxxxxxx agrees not to undertake process changes,
design changes, or process step discontinuance affecting electrical performance
and/or mechanical form and fit of Requirements without prior written
notification and concurrence of X-X TSMD, which concurrence will not be
unreasonably withheld. In the absence of some other documented mutual agreement
applying to this Agreement as a whole, or to the issuance of any specific X-X
TSMD authorization to fulfill Requirements, said advance written notification
shall be required ninety (90) days prior to the subject change.
8.3 Engineering Procedures.
Prior to the commencement of production of Parts for X-X TSMD,
Xxxxxxx-Xxxxxxx shall receive from X-X TSMD a complete data package including
correct masks, drawings and CAD files for laser programming, if applicable.
9. CONFIDENTIAL INFORMATION
9.1 Nondisclosure Agreement.
Xxxxxxx-Xxxxxxx and X-X TSMD agree to execute, as part of this
Agreement, a Nondisclosure Agreement for the reciprocal protection of
confidential information of both parties. Xxxxxxx-Xxxxxxx shall not disclose to
third parties confidential process and design rule information relating to the
manufacture of Parts for X-X TSMD except as necessary for such manufacture,
which disclosure shall only be made pursuant to a confidentiality agreement
approved by X-X TSMD.
10. ASSIGNMENT, FORCE MAJEURE
10.1 Assignment.
Neither party shall delegate, assign or transfer its rights or
obligations under this Agreement, whether in whole or part, without the written
consent of the other party. Not withstanding the foregoing, X-X TSMD shall have
the right to (i) assign its rights under this Agreement to any Affiliate of X-X
TSMD or TSMD Acquisition, upon the condition that such Affiliates are bound by
the terms and conditions of this Agreement; and (ii) transfer their rights under
this Agreement upon the sale of all or substantially all of the assets of X-X
TSMD or TSMD Acquisition.
10.2 Force Majeure.
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Neither party shall be liable for any failure or delay in its
performance under this Agreement due to acts of God, acts of civil or military
authority, fires, floods, earthquakes, riots, wars or any other cause beyond the
reasonable control of the delayed party provided that the delayed party: (i)
gives the other party written notice of such cause within fifteen (15) days of
the discovery of the event; and (ii) uses its reasonable efforts to remedy such
delay in its performance.
11. INTELLECTUAL PROPERTY RIGHTS.
11.1 Gallium Arsenide.
All Intellectual Property Rights relating to the design of
Gallium Arsenide Parts manufactured exclusively for X-X TSMD shall be the
exclusive property of X-X TSMD. All Intellectual Property Rights arising prior
to the termination date and relating to the processing or fabrication of Gallium
Arsenide Parts shall be the property of Xxxxxxx-Xxxxxxx but shall be licensed to
X-X TSMD on a royalty-free, non-exclusive, perpetual basis, without the right to
sublicense except to Affiliates, for the fabrication of Gallium Arsenide Parts
for X-X TSMD. Any patents or patent applications that claim any invention
relating to the processing or fabrication of Gallium Arsenide Parts shall be the
property of Xxxxxxx-Xxxxxxx but shall be licensed to X-X TSMD on the same terms
and conditions as set forth in the Cross License. The parties agree to cooperate
in the execution of such a patent license.
11.2 Thin Film.
All Intellectual Property Rights relating to the design of
Thin Film Parts manufactured exclusively for X-X TSMD shall be the exclusive
property of X-X TSMD. All Intellectual Property Rights arising prior to the
termination date and relating to the processing or fabrication of Thin Film
Parts shall be the property of X-X TSMD but shall be licensed to Xxxxxxx-Xxxxxxx
on a royalty-free basis, non-exclusive, perpetual basis, without the right to
sublicense except to Affiliates, for the fabrication of Thin Film Parts for X-X
TSMD or for use in products sold by Xxxxxxx-Xxxxxxx; provided, however, that if
this Agreement is terminated by X-X TSMD's election under Section 2.3 or by X-X
TSMD's default prior to December 31, 2000, Xxxxxxx-Xxxxxxx shall be licensed to
sell to third parties Thin Film Parts that do not duplicate in whole or with
minor modifications the proprietary designs of Thin Film parts manufactured for
X-X TSMD. Any patents or patent applications that claim any invention relating
to the processing or fabrication of Thin Film Parts shall be the property of X-X
TSMD but shall be licensed to Xxxxxxx-Xxxxxxx on the same terms and conditions
as set forth in the Cross License. The parties agree to cooperate in the
execution of such a patent license.
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11.3 Masks.
Masks for new Gallium Arsenide Parts (i.e., Parts manufactured
solely for X-X TSMD from designs paid for by T-J TSMD which designs do not exist
on the Closing Date ) shall be provided by Xxxxxxx-Xxxxxxx at X-X TSMD's
expense, which expense may be charged to research and development costs. Masks
for new Thin Film Parts shall be provided by X-X TSMD to Xxxxxxx-Xxxxxxx. Active
masks (i.e., masks that have been used within the previous twelve (12) months)
for Parts manufactured for X-X TSMD will remain the property of X-X TSMD and
will be stored by Xxxxxxx-Xxxxxxx at its expense. Inactive masks (i.e., masks
that have not been used within the previous twelve (12) months) shall be
returned to, and shall remain the property of, X-X TSMD. Xxxxxxx-Xxxxxxx shall
maintain an inventory list of active masks which will be made available to X-X
TSMD on reasonable notice. Xxxxxxx-Xxxxxxx shall replace, at its own expense,
any active masks that are lost or are damaged, other than damage that results
from normal wear and tear. On the termination of this Agreement, Xxxxxxx-Xxxxxxx
will promptly transfer to X-X TSMD all masks for X-X TSMD Parts.
11.4 Design Rules and Process Specifications.
Xxxxxxx-Xxxxxxx shall maintain and update no less frequently
than every six (6) months for X-X TSMD's use copies of design rules and process
specifications for X-X TSMD products. On the termination of this Agreement,
Xxxxxxx-Xxxxxxx will promptly transfer such copies to X-X TSMD, but
Xxxxxxx-Xxxxxxx may retain copies for its own use provided that such use does
not violate any prohibition on the use of Intellectual Property.
12. OPERATIONS COUNCIL AND AUDIT RIGHTS
12.1 Operations Council.
The parties shall appoint an Operations Council consisting of
an equal number of representatives, but no less than four, from each party. The
Operations Council shall meet regularly, but no less frequently than quarterly.
The Operations Council shall also convene at any time at the request of either
party so long as such party provides one week's notice to the other party. The
Operations Council will be responsible for the following:
(a) Reviewing Requirements Forecasts and production
capacities;
(b) Reviewing and approving actual and projected
expenditures for research and development and
capital acquisition;
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(c) Adjusting pricing and delivery targets at
specified intervals;
(d) Reviewing process costs, process cost multipliers,
process yields and yield drivers;
(e) Reviewing Lead Times including queue times and
factory cycle times; and
(f) Reviewing summaries of research and development
progress prepared by Xxxxxxx-Xxxxxxx, including
summaries of research and development funded by
Xxxxxxx-Xxxxxxx that adds to the value of the
Intellectual Property Rights of the parties.
12.1 Audit Rights.
As specified herein, X-X TSMD has the right to audit certain
costs and expenditures in connection with research and development projects and
the costs, data and methods used to adjust payments to Xxxxxxx-Xxxxxxx. Such
audits will occur no more frequently than reasonably necessary to ensure proper
adjustments of payments and expenditures of research and development funds. Such
audits will occur on reasonable notice to Xxxxxxx-Xxxxxxx and will be conducted
in accordance with Generally Accepted Accounting Principles. Xxxxxxx-Xxxxxxx
agrees to cooperate with such audits and provide such assistance and support, at
no cost to X-X TSMD, as X-X TSMD may reasonably request.
13. MISCELLANEOUS
13.1 Currency.
Currency will be in U.S. dollars.
13.2 Amendments; Waivers.
This Agreement and any exhibit attached hereto may be amended
only by agreement in writing of Xxxxxxx-Xxxxxxx and X-X TSMD. No waiver of any
provision nor consent to any exception to the terms of this Agreement shall be
effective unless in writing and signed by the party to be bound and then only to
the specific purpose, extent and instance so provided.
13.3 Exhibits; Integration.
This Agreement, together with the exhibits attached hereto,
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements and understandings of the
parties in connection therewith except for the Purchase Agreement; provided,
however, that this Agreement does supersede Exhibit A to the Purchase
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Agreement (the "GaAs/Thin Film Term Sheet"). Without limiting the foregoing, the
parties acknowledge and agree that the exercise of any rights under this
Agreement, including a party's rights following a termination of this Agreement,
is limited by the restrictions on competitive activities set forth in Section
5.1 of the Purchase Agreement.
13.4 Governing Law.
This Agreement, the legal relations between the parties, and
any Action, whether contractual or non-contractual, instituted by any party with
respect to matters arising under or growing out of or in connection with or in
respect of this Agreement, including, but not limited to, the negotiation,
execution, interpretation, coverage, scope, performance, breach, termination,
validity, or enforceability of this Agreement, shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts made and performed in such State and without regard to conflicts of
law doctrines.
13.5 Headings.
The descriptive headings of the Articles, Sections and
subsections of this Agreement are for convenience only and do not constitute a
part of this Agreement.
13.6 Counterparts.
This Agreement and any amendments hereto may be executed in
one or more counterparts. All of such counterparts shall constitute one and the
same agreement and shall become effective when one or more counterparts have
been signed by each party and delivered to the other party.
13.7 Notices.
Any notice or other communication hereunder must be given in
writing and (a) delivered in person, (b) transmitted by telex, telefax or
telecommunications mechanism (provided that any notice so given is also mailed
or delivered as provided in clause (c)) or (c) mailed by certified or registered
mail, postage prepaid, receipt requested or delivered by reputable overnight
courier service as follows:
15
If to X-X TSMD, addressed to:
Stellex Microwave Systems, Inc.
c/o Mentmore Holdings, Inc.
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000-0000
Facsimile: 000-000-0000
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
With a copy to:
O'Melveny & Xxxxx
Embarcadero Center West
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000-0000
Facsimile: 000-000-0000
Attn: Xxxxxx X. Xxxxx, Esq.
If to Xxxxxxx-Xxxxxxx, addressed to:
Xxxxxxx-Xxxxxxx Company
Stanford Research Park
0000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Facsimile: 000-000-0000
Attn: Vice President and Chief Financial Officer
or to such other address or to such other person as any party shall have last
designated by such notice to the other parties. Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number so specified in (or pursuant to) this
Section 12.6 and an appropriate answerback is received, (ii) if given by mail or
by overnight delivery, three days after such communication is deposited in the
mails with first class postage prepaid or delivered to the overnight courier,
addressed as aforesaid or (iii) if given by any other means, when actually
delivered at such address.
13.8 Expenses.
Xxxxxxx-Xxxxxxx and X-X TSMD shall each pay their own expenses
incident to the negotiation, preparation and performance of this Agreement
except as specifically set forth herein.
13.9 Remedies; Waiver.
To the extent permitted by Law, all rights and remedies
existing under this Agreement and any related agreements or documents are
cumulative to and not exclusive of, any rights or remedies otherwise available
under applicable Law. No failure on the part of any party to exercise or delay
in exercising any
16
right hereunder shall be deemed a waiver thereof, nor shall any single or
partial exercise preclude any further or other exercise of such or any other
right.
13.10 Attorney's Fees.
In the event of any Action by any party arising under or out
of, in connection with or in respect of this Agreement, the prevailing party
shall be entitled to reasonable attorney's fees, costs and expenses incurred in
such Action. However, disputes related to purchase authorizations for specific
research and development projects and for specific Parts shall be subject to
clause 23 ("Disputes") of the Conditions of Purchase; other disputes shall not
be subject to such clause.
13.11 Representation By Counsel; Interpretation.
Xxxxxxx-Xxxxxxx and the X-X TSMD each acknowledge that each
party to this Agreement has been represented by counsel in connection with this
Agreement. Accordingly, any rule of Law or any legal decision that would require
interpretation of any claimed ambiguities in this Agreement against the party
that drafted it has no application and is expressly waived. The provisions of
this Agreement shall be interpreted in a reasonable manner to effect the intent
of the parties.
13.12 Specific Performance.
Xxxxxxx-Xxxxxxx and X-X TSMD each acknowledge that, in view of
the uniqueness of the transactions contemplated by this Agreement, each party
would not have an adequate remedy at law for money damages in the event that
this Agreement has not been performed in accordance with its terms, and
therefore agrees that the other party shall be entitled to specific enforcement
of the terms hereof in addition to any other remedy to which it may be entitled,
at law or in equity.
13.13 Severability.
If any provision of this Agreement is determined to be
invalid, illegal or unenforceable by any Governmental Entity, the remaining
provisions of this Agreement shall remain in full force and effect provided that
the essential terms and conditions of this Agreement for Xxxxxxx-Xxxxxxx and the
X-X TSMD remain valid, binding and enforceable.
17
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
XXXXXXX-XXXXXXX COMPANY
By: /s/ W. Xxxxx Xxxxxxx
--------------------------
Name: W. Xxxxx Xxxxxxx
------------------------
Title: President and CEO
------------------------
STELLEX MICROWAVE SYSTEMS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------
Name: Xxxxxxx X. Xxxxxx
------------------------
Title: Treasurer
------------------------
TSMD ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxx
--------------------------
Name: Xxxxxxx X. Xxx
------------------------
Title: Vice President
------------------------
S-1
EXHIBIT A
FORECASTS
A B C D E F G H
P/F Flow Yield Blank Qty Queue Time Cycle Time Lead Time Forecasted COMMENTS
Required (D+E) Delivery Date
PSR 0.88 4 1 11 12 10/15/97
PSN 0.91 2 1 8 9 12/30/97
PNR 0.88 1 1 4 5 1/15/98
PNN 0.88 1 3 4
PSR+CO 0.86 1 12 13
PSN+CO 0.91 1 9 10
PNR+CO 0.88 3 1 5 6 10/15/97
PNN+CO 0.88 1 1 4 5 12/30/97
PSRI 0.86 2 1 13 14 1/15/98
PSNI 0.91 1 10 11
PNRI 0.88 1 6 7
PNNI 0.88 1 5 6
PSR23 0.88 1 16 17
PSN23 0.91 1 13 14
PNR23 0.88 1 11 12
PNN23 0.88 1 8 9
PSR+CO23 0.88 1 17 18
PSN+CO23 0.91 1 14 15
PNR+CO23 0.88 1 10 11
PNN+CO23 0.88 1 9 10
PSRI23 0.88 1 18 19
PSNI23 0.91 1 15 16
PNRI23 0.88 1 11 12
PNNI23 0.88 1 10 11
Area to be filled out by TSMD Buyer
Queue and Cycle Times provided by WJ prior to Forecast
Queue, Cycle and Lead Times are in working days
Flow Yield provided by WJ prior to Forecast
Note: The numbers and dates listed above are for illustration purposes only.
A-1
PSR10 0.88 1 13 14
PSN10 0.91 1 10 11
PNR10 0.88 1 6 7
PNN10 0.88 1 5 6
PSR+CO10 0.88 1 14 15
PSN+CO10 0.91 1 11 12
PNR+CO10 0.88 1 7 8
PNN+CO10 0.88 1 6 7
PSRI10 0.88 1 15 16
PSNI10 0.91 1 12 13
PNRI10 0.88 1 8 9
PNNI10 0.88 1 7 8
PSRMI 1 13 14
PSNMI 1 10 11
PNRMI 1 6 7
PNNMI 1 5 6
Area to be filled out by TSMD Buyer
Queue and Cycle Times provided by WJ prior to Forecast
Queue, Cycle and Lead Times are in working days
Flow Yield provided by WJ prior to Forecast
Note: The numbers and dates listed above are for illustration purposes only.
A-2
A B CDE F G H I J K
Sites/ Flow Min Qty/ Max Qty/ Sub Qty Blank
P/N P/F Blank Blank Yield Blank Blank Required Qty
(F*G) F MRP (J/H)
XXXXXX PSN 2 X 2 198 0.91 181 198 100 1
PSN 2 X 2 198 0.91 181 198 200 2
PSN 2 X 2 198 0.91 181 198 400 3
PSN 2 X 2 198 0.91 181 198 300 2
YYYYYY PSN 3 X 3 36 0.91 33 36 100 4
PSN 3 X 3 36 0.91 33 36 300 10
PSN 3 X 3 36 0.91 33 36 500 16
PSN 3 X 3 36 0.91 33 36 100 4
ZZZZZZ PSN 2 x 2 36 0.91 33 36 2000 61
AAAAAA PNR 4 x 4 54 0.88 48 54 500 11
BBBBBB PNN 2 x 2 165 0.88 146 165 300 3
PNN 2 x 2 165 0.88 146 165 200 2
CCCCCC PSR 3 x 3 24 0.88 22 24 750 35
5750 154
A L M N O P Q R
Forecasted
Square Queue Cycle Lead Forecasted Delivery
P/N Inches Time Time Time Sub Qty Date Comments
(K*C*E) (M+N) (K*H) MRP
XXXXXX 4 5 8 13 181 10/15/97
8 5 8 13 362 11/10/97
12 5 8 13 181 12/30/97
8 5 8 13 181 1/15/98
YYYYYY 36 5 8 13 132 10/15/97
90 5 8 13 330 11/10/97
144 5 8 13 528 12/30/97
36 5 8 13 438 1/15/98
ZZZZZZ 244 5 8 13 2013 10/30/97
AAAAAA 176 5 4 9 528 10/15/97
BBBBBB 12 5 3 8 438 11/1/97
8 5 3 8 292 12/3097
CCCCCC 315 5 11 16 770 1/5/98
1093
Area to be filled out by TSMD Buyer
Queue and Cycle Times provided by WJ prior to Forecast
Queue, Cycle and Lead Times are in working days
Flow Yield provided by WJ prior to Forecast
Note: The numbers and dates listed above are for illustration purposes only.
A-3
A B C D E
Device Type Device Qty Required Lead Time Forcasted Delivery Date COMMENTS
LI02 50 10/15/97
LI03 100 12/30/97
LI05A 3 1/15/98
SM01
DM04
DM07A
DM07B
AS05A
AS05B
BA02A
FA03B
FA03C
FA04A
XX00
XX00
FA13
LA02
LA03A
LA01
FP02
F2400HP
FP01
F1200HM
F1200HP
SW01
Area to be filled out by TSMD Buyer
Lead Times provided by WJ prior to Forecast
Lead Times are in working days
Note: The numbers and dates listed above are for illustration purposes only.
A-4
SW01A
F600H
F600HM
F600HP
F200H
F200HM
F200T
XX00
XX00
153
Area to be filled out by TSMD Buyer
Lead Times provided by WJ prior to Forecast
Lead Times are in working days
Note: The numbers and dates listed above are for illustration purposes only.
A-5
EXHIBIT B
PROCESS COSTS
*
EXHIBIT C
TSMD SHARE RATIO
*
C-1
EXHIBIT D
ILLUSTRATION OF TSMD'S SHARE OF PROCESS COSTS CALCULATION
*
D-2
EXHIBIT E
UNIT PRICES
GaAs and Thin Film Unit Price Schedule
Prepared on 22 September 1997
GaAs Devices:
Item Description Unit Price
1 AS05A *
2 AS05B
3 BA02A
4 BA04
5 BA08*
6 DM04
7 DM07A
8 DM07B
9 F200H
10 F200T
11 F600H
12 F600HM*
13 F600HP
14 FA03B*
15 FA03C*
16 FA04A
17 FA08
18 FA13
19 FM03
20 FP01
21 FP02
22 HD01
23 LA01
24 LA02
25 LA03A
26 L102
27 L103
28 SM01*
29 SW01
30 SW01A*
31 L105A*
--------
*Available for lifetime buys until June 30, 1998.
E-1
GaAs and Thin Film Unit Price Schedule
Prepared on 22 September 1997
Thin Film:
Item Description Unit Price*
2 Inch Standard, No Cutouts, No Irregulars
32 PSR Plated, Solid, Resistors *
33 PSN Plated, Solid, No Resistors
34 PNR Plated, No Holes, Resistors
35 PNN Plated, No Holes, No Resistors
3 Inch Standard, No Cutouts, No Irregulars
36 PSR Plated, Solid, Resistors
37 PSN Plated, Solid, No Resistors
38 PNR Plated, No Holes,Resistors
39 PNN Plated, No Holes, No Resistors
4 Inch Standard, No Cutouts, No Irregulars
40 PSR Plated, Solid, Resistors
41 PSN Plated, Solid, No Resistors
42 PNR Plated, No Holes, Resistors
43 PNN Plated, No Holes, No Resistors
2 Inch Standard, With Cutouts
44 PSR Plated, Solid, Resistors
45 PSN Plated, Solid, No Resistors
46 PNR Plated, No Holes, Resistors
47 PNN Plated, No Holes, No Resistors
3 Inch Standard, With Cutouts
48 PSR Plated, Solid, Resistors
49 PSN Plated, Solid, No Resistors
50 PNR Plated, No Holes, Resistors
51 PNN Plated, No Holes, No Resistors
4 Inch Standard, With Cutouts
52 PSR Plated, Solid, Resistors
53 PSN Plated, Solid, No Resistors
54 PNR Plated, No Holes, Resistors
55 PNN Plated, No Holes, No Resistors
2 Inch Standard, With Irregulars
56 PSR Plated, Solid, Resistors
57 PSN Plated, Solid, No Resistors
58 PNR Plated, No Holes, Resistors
59 PNN Plated, No Holes, No Resistors
*
E-2
*
GaAs and Thin Film Unit Price Schedule
Prepared on 22 September 1997
Thin Film:
Item Description Unit Price*
3 Inch Standard, With Irregulars
60 PSR Plated, Solid, Resistors *
61 PSN Plated, Solid, No Resistors
62 PNR Plated, No Holes, Resistors
63 PNN Plated, No Holes, No Resistors
4 Inch Standard, With Irregulars
64 PSR Plated, Solid, Resistors
65 PSN Plated, Solid, No Resistors
66 PNR Plated, No Holes, Resistors
67 PNN Plated, No Holes, No Resistors
3 Inch Production Mosaic, No Cutouts, No Irregulars
68 PSR Plated, Solid, Resistors
69 PSN Plated, Solid, No Resistors
70 PNR Plated, No Holes, Resistors
71 PNN Plated, No Holes, No Resistors
4 Inch Production Mosaic, No Cutouts, No Irregulars
72 PSR Plated, Solid, Resistors
73 PSN Plated, Solid, No Resistors
74 PNR Plated, No Holes, Resistors
75 PNN Plated, No Holes, No Resistors
3 Inch Production Mosaic, With Cutouts
76 PSR Plated, Solid, Resistors
77 PSN Plated, Solid, No Resistors
78 PNR Plated, No Holes, Resistors
79 PNN Plated, No Holes, No Resistors
4 Inch Production Mosaic, With Cutouts
80 PSR Plated, Solid, Resistors
81 PSN Plated, Solid, No Resistors
82 PNR Plated, No Holes, Resistors
83 PNN Plated, No Holes, No Resistors
3 Inch Production Mosaic, With Irregulars
84 PSR Plated, Solid, Resistors
85 PSN Plated, Solid, No Resistors
86 PNR Plated, No Holes, Resistors
87 PNN Plated, No Holes, No Resistors
E-3
Thin Film:
Item Description Unit Price*
4 Inch Production Mosaic, With Irregulars
88 PSR Plated, Solid, Resistors *
89 PSN Plated, Solid, No Resistors
90 PNR Plated, No Holes, Resistors
91 PNN Plated, No Holes, No Resistors
Substrate Test and Bonding Coupons
92 Test Coupons, "Tweaks", Per Blank
93 Bonding Coupons, Per Blank
Thin Film Services
94 Gold Germanium Laser Cutting, Fixed
Labor Fee Per Month
95 Duroid Laser Cutting
Packaging: GaAs and Thin Film packages are not include in pricing and X-X
TSMD must return packages for recycling.
Cutting: The parties will endeavor to schedule demand so that gold germanium
laser cutting services will not exceed 20% of laser capacity during any one week
period. Xxxxxxx-Xxxxxxx will make reasonable efforts to accommodate capacity
surges beyond 20%. X-X TSMD is responsible for providing raw materials, preform
layout per the design guidelines, and the AutoCad file with order submission.
Special cuts with the laser or saw are included in the fixed preform cutting
price and such cuts are subject to the limitations set forth herein.
Xxxxxxx-Xxxxxxx is not responsible for coining AuGe preforms.
Substrate test and bonding coupon: Substrate test and bonding coupon pricing
will be on a per blank basis. All yielded parts will be delivered to X-X TSMD.
Inspection and individual item counting for substrate test and bonding coupon
are not required by Xxxxxxx-Xxxxxxx. Packaging will be in accordance with
current procedures.
*
E-4
EXHIBIT F
LEAD TIMES
GaAs Devices Parts in Stock Parts Not in Stock
AS05A 10 Working Days ARO 50 Working Days ARO
AS05B 10 Working Days ARO 50 Working Days ARO
BA02A 10 Working Days ARO 50 Working Days ARO
BA04 10 Working Days ARO 50 Working Days ARO
BA08 10 Working Days ARO 50 Working Days ARO
DM04 10 Working Days ARO 50 Working Days ARO
DM07A 10 Working Days ARO 50 Working Days ARO
DM07B 10 Working Days ARO 50 Working Days ARO
F1200HM 10 Working Days ARO 50 Working Days ARO
F1200Hp 10 Working Days ARO 50 Working Days ARO
F200H 10 Working Days ARO 50 Working Days ARO
F200HM 10 Working Days ARO 50 Working Days ARO
F200T 10 Working Days ARO 50 Working Days ARO
F200TCV 10 Working Days ARO 50 Working Days ARO
F2400HP 10 Working Days ARO 50 Working Days ARO
F600H 10 Working Days ARO 50 Working Days ARO
F600HM 10 Working Days ARO 50 Working Days ARO
F600HP 10 Working Days ARO 50 Working Days ARO
FA03B 10 Working Days ARO 50 Working Days ARO
FA03C 10 Working Days ARO 50 Working Days ARO
FA04A 10 Working Days ARO 50 Working Days ARO
FA08 10 Working Days ARO 50 Working Days ARO
FA13 10 Working Days ARO 60 Working Days ARO
FM03 10 Working Days ARO 50 Working Days ARO
FP01 10 Working Days ARO 50 Working Days ARO
FP02 10 Working Days ARO 50 Working Days ARO
HD01 10 Working Days ARO 50 Working Days ARO
LA01 10 Working Days ARO 60 Working Days ARO
LA02 10 Working Days ARO 60 Working Days ARO
LA03A 10 Working Days ARO 50 Working Days ARO
LI02 10 Working Days ARO 50 Working Days ARO
LI03 10 Working Days ARO 50 Working Days ARO
LI05A 10 Working Days ARO 50 Working Days ARO
SM01 10 Working Days ARO 50 Working Days ARO
SW01 10 Working Days ARO 50 Working Days ARO
SW01A 10 Working Days ARO 50 Working Days ARO
R&D Services
To be quoted individually
F-1
Thin-Film Production Days ARO
PSR Plated, Solid, Resistors 16
PSN Plated, Solid, No Resistors 13
PNR Plated, No Holes, Resistors 9
PNN Plated, No Holes, No Resistors 8
PSR with Cutouts 17
PSN with Cutouts 14
PNR with Cutouts 10
PNN with Cutouts 9
PSR Irregulars 18
PSN Irregulars 15
PNR Irregulars 11
PNN Irregulars 10
PSR Mosaics 19
PSN Mosaics 16
PNR Mosaics 12
PNN Mosaics 11
PSR Mosaics with Cutouts 20
PSN Mosaics with Cutouts 17
PNR Mosaics with Cutouts 13
PNN Mosaics with Cutouts 12
PSR Mosaics Irregulars 21
PSN Mosaics Irregulars 18
PNR Mosaics Irregulars 14
PNN Mosaics Irregulars 13
Wafer Surcharges:
Double-sided Add 5 Days
6 micron gold Add 2 Days
10 Mil Aluminum Add 2 Days
Substrate Test and Bonding Coupons 5
Note that the above delivery schedule is based on working days.
F-2
EXHIBIT G
QUALITY
Xxxxxxx-Xxxxxxx Company quality performance is targeted at zero defects.
TSMD group reserves the right to return finished product to Xxxxxxx-Xxxxxxx
Company at no cost to TSMD Group when the product lot quality drops below the
acceptable levels defined in ANSI/ASQCZ1.4, Tables I & II with sampling plans
defined by General Inspection Level II and AQL level 2.5. Returned product shall
be reinspected and a completed failure analysis shall be delivered to TSMD Group
within three (3) working days of receipt of returned units. A resolution shall
be implemented within ten (10) working days of receipt of returned units.
Acceptable Level and Sampling Plan Samples: (see attached table)
Sample 1:
For Quantity of Product received 50, Table I General
Inspection Level II specifies Level D.
Table II, AQL level 2.5 specifies that if 1 or more rejects
are found, the lot may be returned.
Sample 2:
For Quantity of Product received 150, Table I General
Inspection Level II specifies level F.
Table II, AQL level 2.5 specifies that if 1 reject is found,
the lot must be accepted but if 2 or more are found, the lot
may be returned.
Any change to the methods, levels or sampling plan for inspection of product
will be subject to negotiation.
Xxxxxxx-Xxxxxxx to reference and apply the following Quality Standards for the
purpose of this agreement.
Mil-Standards:
Mil-STD-883, Methods 2010 & 2032, as applicable
ISO9001 Certification Required
Other:
ANSI/ASQCZ1.4
WJ14062-000 (Substrate Visual Criteria)
WJ103277-000 (GaAs Device Visual Criteria)
TBD (Preform Visual Criteria)
X-X TSMD reserves the right to terminate any specific authorization in the event
continuing quality problems and/or delivery slippages occur, at no cost to X-X
TSMD.
G-1
EXHIBIT H
PURCHASE ORDER
CONDITIONS OF PURCHASE
Where "WJ" appears in the "Conditions of Purchase" this shall mean
Xxxxxxx-Xxxxxxx Company, or any subsidiary.
1. ACCEPTANCE AND MODIFICATION OF AGREEMENT.
This order becomes a binding contract, subject to the terms and
conditions hereof, when accepted by acknowledgment or commencement of
performance. Any modification of this order, to be valid, must be in
writing and signed by WJ's authorized purchasing representative. Any
acknowledgment form or other form of Seller containing terms and
conditions of sale submitted by Seller to WJ shall not have the effect
of modifying the terms and conditions hereof. WJ will consider Seller's
request for changes only if such request is made in writing and
directed to specific clauses in this order. No change shall be binding
upon WJ unless specifically accepted in writing.
2. PACKING, SHIPPING, DELIVERY AND RISK OF LOSS.
a) Packing and Shipping
All shipments will be packed to prevent damage in transit,
assure lowest transportation cost and meet carrier's tariff
requirements. No charge will be made for boxing, crating or
storage without prior written authorization of WJ.
Shipping costs shall be paid according to F.O.B. designation.
Where WJ is designated as paying freight, Seller bears cost of
delivery of goods to Shipper and WJ pays shipping costs in
transit. Where Seller is designated as paying freight, Seller
bears all shipping costs prior to receipt by WJ.
In the absence of specific instructions from WJ, shipment
shall be forwarded by that means of shipment necessary to
comply with the delivery date specified on the purchase order.
Seller shall not insure shipments in excess of carrier's
maximum liability. Materials shipped on this order must not be
in excess of quantity ordered. Over shipments may be returned
at Seller's expense.
b) Delivery
Time is of the essence in this order. Production schedules at
WJ are dependent upon the delivery dates specified herein, and
delays will substantially impair the value of the contract.
Seller shall bear any premium shipping costs necessary to meet
contractual delivery schedule. Seller shall report any
anticipated delay immediately for whatever cause, including
labor disputes, material shortages or other events affecting
delivery. WJ reserves the right to terminate this order for
anticipated delay and for any untimely delivery. Advanced
shipments may not be made without WJ's prior authorization.
c) Risk of Loss
Irrespective of the "F.O.B." designation on the face of this
order, title shall pass
to WJ upon receipt and acceptance by WJ at is facility and
Seller shall bear the risk of loss until such receipt by WJ.
3. WARRANTIES
Acceptance of this order by Seller constitutes affirmation of fact by
Seller that goods delivered and services furnished under this order,
and the preservation, packaging, marking and preparation for shipment
of any such goods, will be of good quality and workmanship and will
conform with the specifications, model description of goods or other
requirements of this order, and shall be of merchantable quality and
fit for the purpose intended. Such warranties, together with Seller's
service warranties and guarantees, if any, shall survive inspection,
test acceptance of any payment for the items and shall run to WJ, its
successors, assigns and customers.
Except for latent defects, notice of any defect or nonconformity must
be given by WJ to the Seller within one (1) year after acceptance. WJ
may at its option, return the defective or nonconforming item at
Seller's expense for credit, or require prompt correction or
replacement or have the defective item corrected or replaced at
Seller's expense. Defective or nonconforming items shall not be
corrected or replaced unless specified on WJ's written order. Items
required to be corrected or replaced shall be subject to the provisions
of this clause and the clause hereof entitled "Inspection" in the same
manner and to the same extent as items originally delivered under this
order. However, all warranties for corrected or replaced goods shall
run for a period of one (1) year from the date of acceptance of such
corrected or replaced goods.
The rights of WJ provided in this clause are in addition to any order
rights provided by law, equity or by this order, including but not
limited to Seller indemnification of WJ for any loss or damage
resulting from the breach of any warranty expressed above. Express or
specially negotiated warranties shall not extinguish the warranties set
forth above. The goods and services furnished hereunder shall be deemed
unique under U.C.C. Section 2716.
4. [Deleted].
5. [Deleted].
6. RESPONSIBILITY FOR PROPERTY
Seller shall bear the risk and be responsible for any loss or damage to
materials, tools, equipment, data or other property furnished by WJ to
Seller.
7. CHANGES
a) WJ may at any time, by written notice to Seller, signed by
WJ's authorized purchasing representative, make changes,
within the general scope of this order, in any one or more of
the following: (i) drawings, designs or specifications, where
the goods to be furnished are to be specially manufactured for
WJ in accordance therewith; (ii) method of shipment or
packing; (iii) place of delivery; and (iv) quantities and
delivery schedules provided herein. If any such change
causes an increase or decrease in the cost of or the time
required for the performance of any part of the work under
this order, an equitable adjustment shall be made in the order
price or delivery schedule, or both, and this order shall be
modified in writing accordingly. Any claim by the Seller for
adjustment under this clause must be asserted within twenty
(20) days from the date of receipt by the Seller of the
notification of change; provided, however, that WJ if it
decides that the facts justify such action, may receive and
act upon any such claim asserted at any time prior to final
payment under this order. However, nothing in this clause
shall excuse the Seller from proceeding with the contract as
changed.
b) WJ technical personnel may exchange technical information with
Seller's technical personnel concerning goods to be furnished.
Any such exchange of information shall be only by way of
assistance and shall in no way relieve Seller of obligations
to perform this order. WJ shall not be bound by any change
effective by Seller unless change is authorized by WJ in
accordance with paragraph (a) of this clause.
8. SUSPENSION OF WORK
WJ may, by written order, suspend all or part of the work to be
performed under this order for any period not to exceed ninety (90)
days. Within such period, or any extension thereof to which the parties
may agree, WJ shall either cancel such suspensions or terminate the
work covered by suspension in accordance with paragraphs 9 or 10
hereof. Seller shall resume work whenever a suspension is canceled or
expires. An equitable adjustment shall be made in the delivery
schedule, or order price, or both, if the suspension results in a
change in Seller's costs of performance or ability to meet the order
delivery schedule, provided Seller asserts a claim for adjustment
within twenty (20) days after the end of the period of suspension, and
provided the suspended work is not terminated in accordance with
paragraph 11 hereof.
9. [Deleted].
10. [Deleted].
11. [Deleted].
12. PATENTS, TRADEMARKS, TRADE NAMES AND COPYRIGHTS
Seller agrees to indemnify and save harmless WJ, its officers, agents,
successors, assigns and customers against all damages, claims, demands,
attorneys' fees and costs of any kind for actual or alleged
infringement of any trade name, trademark, copyrights or patent (unless
the goods ordered are of WJ's design) arising in connection with the
possession, sale or use of any goods or services furnished by Seller
hereunder.
13. COMPLIANCE WITH LAWS
Seller warrants that (i) in the performance of this order it will
comply with all applicable laws including but not limited to local,
state and federal laws and regulations including
but not limited to the Departments of Commerce Department of
Transportation and the U.S. and California Environmental Protection
Agencies. (ii) no law, rule or ordinance of the United States, a state
or any other governmental agency has been violated in the manufacture
or sale of the items or in the performance of services covered by this
order, and will defend and hold WJ harmless from loss, cost or damage
as result of any such actual or alleged violation, or breach of the
warranties herein.
14. HAZARDOUS MATERIALS
a) If goods or services provided hereunder include hazardous
materials as defined by relevant local, state or national law,
Seller represents and warrants that Seller and its employees
providing Services to Buyer understand the nature of and
hazards associated with the handling, transportation, and use
of such hazardous materials, as applicable to Seller.
Seller will be fully responsible for indemnification of any
liability resulting from Seller's actions in connections with
(i) providing such hazardous materials to Buyer, or (ii) the
use of such hazardous materials in providing Services to
Buyer.
b) Seller will promptly provide Buyer with safety data sheets and
any other documentation reasonable necessary to enable Buyer
to comply with applicable laws and regulations.
c) Seller hereby certifies that Items supplied to Buyer do not
"contain" and are not "manufactured with" any ozone depleting
substances, as those terms are defined by law.
15. ASSIGNMENT OF RIGHTS
The term "subcontract" includes but is not limited to purchase orders,
changes and/or modifications thereto. Neither this order nor any right
or obligation hereunder (including claims for moneys due) shall be
assigned by Seller without prior written consent of WJ. All claims for
moneys due or to become due from WJ shall be subject to set-off or
counterclaim arising out of this or any other WJ contract with Seller,
whether before or after date of this order.
16. [Deleted].
17. [Deleted].
18. TAXES
Except as may be otherwise provided in the order, no sales tax shall be
payable, and the price is inclusive of all other applicable taxes.
19. INSOLVENCY
In the event of any proceeding, voluntary or involuntary, in bankruptcy
or insolvency by or against Seller, or in the event of the appointment,
with or without the Seller's consent,
of an assignee for the benefit of creditors, or of a receiver, WJ may
elect to cancel any unfulfilled part of this order without further cost
or liability.
20. INDEMNIFICATION AND INSURANCE
a) Seller agrees to protect, defend, indemnify and hold Buyer
harmless from and against any and all claims, liabilities,
demands, penalties, forfeitures, suits, judgments and the
associated costs and expenses (including attorney's fees),
which Buyer may hereafter incur, as a result of death or
personal injury (including bodily injury) to any person,
destruction or damage to any property, or any violation of
governmental law, regulation, or orders, caused, in whole or
by (a) Seller's breach of any term or provision of this
Agreement, (b) errors, omissions, or willful acts by Seller,
its employees, agents, or subcontractors in the performance of
this Agreement, (c) the presence of Seller's agents,
employees, or subcontractors ("personnel") or equipment on WJ
property, or (d) the use by Seller's personnel of WJ provided
property and equipment, whether or not claims are based on the
condition of such property and equipment or any alleged
negligence of WJ in permitting its use.
b) Seller represents that it carries insurance in at least the
following amounts:
i) Worker's Compensation--statutory limits
ii) Employer's Liability--$500,000 per employee
iii) Blanket General Liability--$1,000,000
iv) Automobile Liability--$1,000,000
Such policies or certificates of insurance shall be furnished
to WJ upon request.
21. INDEPENDENT CONTRACTOR
In performing Services under this Agreement, Seller shall be deemed an
independent contractor and its personnel and other representatives
shall not act as nor be agents or employees of Buyer. As an independent
contractor, Seller will be solely responsible for determining the means
and methods for performing the required Services. Seller shall have
complete charge and responsibility for personnel employed by Seller;
however, Buyer reserves the right to instruct Seller to remove Buyer's
premises immediately any of Seller's personnel who is in breach of
Section 22 of this Agreement. Such removal shall not affect Seller's
obligation to provide Services under this Agreement.
22. SECURITY
Seller confirms, to the best of its knowledge, that employees of Seller
performing work at Buyer's facilities have no record of criminal
convictions involving drugs, assaultive or combative behavior or theft
within the last five years. Seller understands that such employees may
be subject to criminal history investigations by Buyer at Buyer's
expense and will be denied access to Buyer's facilities if any such
criminal convictions are discovered.
23. DISPUTES
a) Any dispute arising under this purchase order which is not
settled by agreement of the parties shall be settled by
arbitration, under the commercial rules of the American
Arbitration Association, applying California law, with venue
at Palo Alto, California. Pending decision or settlement of
any dispute, Seller shall proceed diligently with the
performance of this purchase order. Failure of Seller to so
proceed shall be cause for default termination.
b) [Deleted].
24. [Deleted].
25. NONWAIVER
WJ's failure to insist on strict performance of any provision of this
order, or acceptance of nonconforming goods or services shall not be
deemed to be a waiver of WJ's rights or remedies, or a waiver of any
subsequent default in performance.
26. PRECEDENCE
In the event of any inconsistency among the referenced documents,
attachments, drawings, specifications or other provisions of this
order, the following order of precedence shall apply:
a) Special terms and conditions
b) General terms and conditions
c) Specifications
d) Drawings
e) All other attachments or documents incorporated herein by
reference
27. [Deleted].
