EXHIBIT 10.04
REVENUE SIDE LETTER
March 11, 1997
Xxxxxxxxx Semiconductor Corporation
000 Xxxxxxx Xxxxxx
Xxxxx Xxxxxxxx, XX 00000
Attn: Xx. Xxxx X. Xxxx
President and CEO
Re: Asset Purchase Agreement, dated March 11, 1997, by and between National
Semiconductor Corporation ("National") and Xxxxxxxxx Semiconductor
Corporation ("Fairchild")
Gentlemen and Ladies:
This will confirm our agreement that during the first thirty-nine (39)
months following the close of the above-referenced Asset Purchase Agreement,
National shall purchase from Xxxxxxxxx a minimum of Three Hundred Thirty Million
Dollars ($330,000,000) in goods and services (the "Revenue Commitment") under
the following agreements to be entered into by National and Xxxxxxxxx at the
close of the Asset Purchase Agreement: the Foundry Services Agreement, Assembly
Services Agreement and Mil/Aero Wafer and Services Agreement (collectively, the
"Operating Agreements").
To assure Xxxxxxxxx of a consistent revenue stream, National agrees that
it will manage the Revenue Commitment by purchasing from Xxxxxxxxx goods and
services in at least the amounts of $100,000,000 in Fiscal Year 1998,
$90,000,000 in fiscal year 1999 and $80,000,000 in Fiscal Year 2000. While
purchases for the purchases for the remaining $60,000,000 of the Revenue
Commitment may be made by National at any time during the thirty-nine month
period, National shall work with Xxxxxxxxx to avoid bottlenecks in Xxxxxxxxx'x
capacity. National and Xxxxxxxxx will periodically review the forecasts
submitted under the Operating Agreements in order to ensure that National is on
schedule to satisfy both its annual minimum revenue guarantee and its
obligations under the Revenue Commitment as a whole. If those forecasts indicate
that National will not meet such obligations, the parties shall meet to adjust
the volumes and/or pricing in one or more of the Operating Agreements until such
obligations are satisfied. If the parties cannot reach agreement on such
adjustments, National shall pay Xxxxxxxxx a sum equal to the shortfall in the
profit that Xxxxxxxxx would have earned and the fixed costs that it would have
recovered if National had purchased sufficient goods and services sufficient to
satisfy
the minimum annual revenue guarantee, or as the case may be, the Revenue
Commitment as a whole.
One year after the close of the Asset Purchase Agreement, and every six
(6) months thereafter, the parties will meet to review Xxxxxxxxx'x recovery of
the fixed costs of its FM 6001 6-inch fab. Exhibit M of the Foundry Services
Agreement lists that portion of those fixed costs which National is expected to
cover by means of purchases thereunder. If such purchases are insufficient to
cover National's share of those costs for any fiscal year, National may credit
against the shortfall the fixed cost coverage of purchases made during that
fiscal year in excess of forecast volumes for Xxxxxxxxx'x other wafer fabs
and/or under the other Operating Agreements, it being understood that Xxxxxxxxx
is obligated to provide capacity to National only as set forth in the Operating
Agreements. Should such additional purchases during that fiscal year be
insufficient to cover National's share of the fixed costs, National shall pay
Xxxxxxxxx a sum equal to such remaining shortfall promptly after the end of the
fiscal year. Notwithstanding the foregoing, National shall not be required to
make up any shortfall to the extent that Xxxxxxxxx'x own use of the FM 6001 fab
is greater than that set forth in Exhibit M of the Foundry Services Agreement.
National will be relieved of its obligations hereunder to the extent it is
unable to meet the Revenue Commitment as a result of Xxxxxxxxx'x inability to
provide National with capacity as guaranteed under the Operating Agreements,
provided National has complied with the forecast and order requirements of such
Operating Agreements.
Please confirm you agreement to the above by signing and returning a copy
to the undersigned.
Very truly yours,
NATIONAL SEMICONDUCTOR CORPORATION
BY: /s/ Xxxxxx Xxxxxxx
------------------------------
XXXXXX XXXXXXX
Executive Vice President &
Chief Financial Officer
The foregoing is hereby agreed to and accepted by:
XXXXXXXXX SEMICONDUCTOR CORPORATION
BY: /s/ Xxxxxx X. Xxxxxx
---------------------------------
XXXXXX X. XXXXXX
Executive Vice President
and Chief Financial Officer
