Intersil/ChipPAC Confidential
Exhibit 10.33
SUPPLY AGREEMENT
This Supply Agreement (this "Agreement") is entered into as of June 30,
2000 (the "Effective Date"), by and between ChipPAC Limited, a British Virgin
Islands corporation, having its principal place of business at Craigmuir
Xxxxxxxx, Road Town, Tortola, British Virgin Islands on behalf of itself and
each of its current and future Subsidiaries, including, without limitation, its
Subsidiaries which own and operate facilities in Korea, China and Malaysia
(hereinafter individually or collectively "ChipPAC") and Intersil Corporation, a
Delaware corporation, having its principal place of business at 0000 Xxxxxx
Xxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000 on behalf of Intersil Holding
Corporation and each of Intersil Holding Corporation's current and future
controlled Affiliates (hereinafter collectively or individually "Intersil").
ChipPAC and Intersil are sometimes referred to as a "Party" and collectively
referred to as the "Parties."
RECITALS
WHEREAS, Sapphire Worldwide Investments, Inc. ("Sapphire"), a wholly-owned
indirect subsidiary of Intersil Corporation, has sold to ChipPAC Limited, and
ChipPAC Limited has purchased, the capital stock of Intersil Technology Sdn.
Bhd. (name to be changed to ChipPAC Malaysia Sdn. Bhd.), a Sendirian Berhad (the
"Company") on the terms and conditions set forth in that certain Stock Purchase
Agreement dated as of June 30, 2000 (the "Stock Purchase Agreement"), by and
among ChipPAC Limited, Intersil Corporation, Sapphire and ChipPAC, Inc., a
California corporation;
WHEREAS, the Parties desire to enter into this Agreement pursuant to which
(i) ChipPAC agrees to provide to Intersil, and Intersil agrees to purchase from
ChipPAC, Intersil's requirements of packaging and test services for its
semiconductor products in accordance with the terms and conditions of this
Agreement and (ii) ChipPAC will have the exclusive right to provide PDC Services
(as defined herein) for all semiconductor products which are packaged or tested
by ChipPAC and shipped from ChipPAC facilities; and
WHEREAS, the Parties are party to a separate Supply Agreement Letter
Agreement dated as of the date hereof (the "Letter Agreement").
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is acknowledged, the Parties agree as follows:
1. DEFINITIONS
As used in this Agreement, the following capitalized terms have the
meanings provided below. Other terms may be defined as they appear throughout
the Agreement.
1.1 "Affiliate" of any particular Person means any other Person directly
or indirectly controlling, controlled by or under direct or indirect common
control with such Person. For purposes of this definition, a Person shall be
deemed to be in "control" if such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management or policies of the
Person in question, whether through the ownership of voting securities, by
contract or otherwise.
Intersil/ChipPAC Confidential
1.2 "Bare Die/Wafer Preparation Services" are services, with respect to
Intersil products, required to provide (i) 100% visually inspected die or sawed
wafers in the following configurations depending upon Intersil customer
requirements: probed and sawed wafer on frame, tested die in waffle pack, tested
die in tape and reel or tested die in reconfigured wafer on frame and (ii)
reasonable customer support in die preparation on these Products.
1.3 "Base Unit Cost" shall have the meaning set forth in Section 5.1.
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1.4 "Die" means individual, un-packaged, semiconductor devices.
1.5 "Existing Packages" means Intersil's semiconductor package
configurations for which packaging and test services are provided at the
Facility as of the Effective Date, each as more specifically set forth in the
Letter Agreement.
1.6 "Facility" shall mean the Company's semiconductor packaging and test
facility located at 73 Lorong Enggang, ULU Klang Free Trade Xxxx, 00000 Xxxxx
Xxxxxx, Xxxxxxxx.
1.7 "Fiscal Year" shall mean the period from July 1 in any calendar year
to June 30 of the succeeding calendar year.
1.8 "Meet Competitive Pricing" shall mean the lesser of (i) a competitive
price (including NRE and tooling charges) offered by another qualified supplier
for like product, at like volumes and at like performance standards to those
required in the Letter Agreement, excluding any equity incentive compensation
provided by such supplier (hereafter referred to as the "Competitive Price") or
(ii) the most favored customer net price (including NRE and tooling charges) for
like product, at like volumes and at like performance standards to those
required in the Letter Agreement made available by ChipPAC to any of its
customers, taking into account all special terms, including allowances,
discounts, rebates, payment terms (excluding, in the case of Intel, any discount
for prompt payment terms) or any such similar incentives, but excluding any
equity incentive compensation provided to any customer (hereafter referred to as
the "Most Favored Customer Price"). Whenever ChipPAC is required to provide
Meet Competitive Pricing, such prices shall be obligated to be provided as of
July 1/st/ of any Fiscal Year in question (or the first date during the Term
which ChipPAC begins to provide any such Services, in the case of New Packages),
and thereafter, shall not be reset until each January 1/st/ and July 1/st/
during the Term following the initial establishment of such Meet Competitive
Pricing. For purposes of this Agreement, "a competitive bid offered by another
qualified supplier" shall mean a certified bid provided by a subcontractor that
has the capability to perform on such bid in accordance with industry standards
for like product (i.e., an equivalent part), at like volumes and at like
performance standards to those described in the Letter Agreement.
1.9 "New Packages" shall mean Intersil's package configurations that are
not of the type for which packaging and/or test services are provided at the
Facility or any other facility (including any third party facility) as of the
Effective Date and which are not Subcontract Packages. For
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Intersil/ChipPAC Confidential
purposes of this Agreement, the combination of package outline dimensions,
package lead finish and internal leadframe or substrate design shall constitute
a package configuration. For avoidance of doubt, a package configuration shall
be deemed to be a New Package if any of the package outline dimensions, package
lead finish or internal leadframe or substrate design are different from an
Existing Package, including, without limitation, if (i) the package outline
dimensions are different by more than typical variations in tolerances, (ii)
lead finish is of an entirely different metallurgy than an existing version (as
opposed to mere variations on composition percentage) or (iii) the internal
leadframe design is different (or in the case of a substrate based package, if
the internal design, number of layers or cavity size is different) because it is
deemed necessary for proper packaging or function of a particular semiconductor
device (as opposed to substitution of a different leadframe or substrate design
for convenience or simply due to materials availability).
1.10 "Package(s)" shall mean New Packages (for which ChipPAC exercises its
Right of First Refusal to provide Services pursuant to Section 3.2 hereof),
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Existing Packages and Subcontract Packages transferred to ChipPAC.
1.11 "Packaging Services" means packaging services for the Products.
1.12 "Packaging and Test Services" means, collectively, Packaging Services
and Test Services.
1.13 "PDC Services" are those services, with respect to those Intersil
products for which ChipPAC provides Packaging Services or Test Services as well
as for any other Intersil products that Intersil requests ChipPAC to provide
such services, required to manage and perform the finished goods warehouse,
order processing and fulfillment functions, from both a systems and material
handling standpoint, including receipt of Products into inventory, Product
storage, order processing, pick/pack operations, palletization and
shipping/invoice operations, together with support for expedited shipments, all
as detailed in the Letter Agreement.
1.14 "Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated association, corporation, entity or
government entity (whether federal, state, county, city or otherwise and
including, without limitation, any instrumentality, division, agency or
department thereof).
1.15 "Product and Test Engineering Services" are those services, with
respect to those Intersil products for which ChipPAC provides Packaging Services
or Test Services, described in the Letter Agreement.
1.16 "Production Planning and Control Services" are those services, with
respect to those Intersil products for which ChipPAC provides Packaging
Services, Test Services or PDC Services, associated with material planning,
scheduling, controlling and implementing production operations at the Facility,
all as detailed in the Letter Agreement.
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Intersil/ChipPAC Confidential
1.17 "Products" means Intersil's finished semiconductor devices.
1.18 "Quality Reliability Assurance Services" are those services, with
respect to those Intersil products for which ChipPAC provides Packaging Services
or Test Services, required to assure the quality and reliability of packaged and
tested Products, including qualifications of process and material changes,
change notification, reliability monitors, lot acceptance testing, failure
analysis and retest and restocking of returns, all as detailed in the Letter
Agreement.
1.19 "Services" means collectively, Packaging and Test Services,
Production Planning and Control Services, Quality Reliability Assurance
Services, PDC Services, Product and Test Engineering Services and Bare Die/Wafer
Preparation Services.
1.20 "Subcontract Packages" means Intersil's semiconductor package
configurations for which packaging services are provided by a third party
packaging manufacturer as of the Effective Date. The SOT-223 is a Subcontract
Package which is also tested by a third party manufacturer. A listing of
Subcontract Packages is set forth in the Letter Agreement.
1.21 "Subsidiary" shall mean, with respect to any Person, any corporation,
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partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (irrespective
of whether, at the time, stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof or
(ii) if a partnership, association or other business entity, a majority of the
partnership or other similar ownership interest thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more Subsidiaries of
that Person or a combination thereof.
1.22 "Term" shall mean the Initial Term and any Renewal Terms as each such
term is defined in Section 13.1.
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1.23 "Test Services" means probe and test services for the Products.
1.24 "Wafer" shall mean those substrate materials having electronic
circuits, comprising individual Die corresponding to an unfinished Product,
provided by Intersil to ChipPAC pursuant to this Agreement to be used by ChipPAC
in providing Packaging and Test Services and Bare Die/Wafer Preparation
Services. The Wafers are to comply with those specifications set forth in the
Letter Agreement.
1.25 "Year One" shall mean the period from the Effective Date until June
30, 2001.
1.26 "Year Two" shall mean the period from July 1, 2001 to June 30, 2002.
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Intersil/ChipPAC Confidential
1.27 "Year Three" shall mean the period from July 1, 2002 to June 30,
2003.
1.28 "Year Four" shall mean the period from July 1, 2003 to June 30, 2004.
1.29 "Year Five" shall mean the period from July 1, 2004 to June 30, 2005.
2. SCOPE
2.1 Scope. ChipPAC agrees to provide Services for the Products, and
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Intersil agrees to purchase such Services, in accordance with the terms and
conditions set forth herein. In the event there is a conflict or inconsistency
between this Agreement, the Letter Agreement and any Intersil purchase order,
the terms and conditions of this Agreement and the Letter Agreement shall
govern.
2.2 Packaging and Test Services. ChipPAC shall provide the facilities
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(which may include the Facility, or any other facility owned or operated by
ChipPAC or any of its Affiliates), equipment (other than Intersil Consigned
Equipment (as defined in Section 6.3)), materials (other than Die and Wafers)
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and manpower and technical expertise to perform the Packaging and Test Services
for the Products in accordance with the specifications therefor set forth in the
Letter Agreement and purchase specifications set forth in the Letter Agreement.
2.3 Consignment of Wafers and Die. In accordance with specifications set
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forth in the Letter Agreement, Intersil shall supply on consignment to ChipPAC
sufficient semiconductor Wafers and Die (FOB at the Facility or any other
facility owned or operated by ChipPAC at which the Services are to be
performed), in the appropriate product mix to permit ChipPAC to perform the
Services in accordance with Intersil's Weekly Production Plan pursuant to
Section 4.2.
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All semiconductor devices and parts consigned by Intersil shall be
and remain the sole property of Intersil, and shall be used by ChipPAC for
performing Services for Intersil products only, and all such Intersil products
derived in whole or in part therefrom shall at all times be maintained as
Intersil property, appropriately labeled to distinguish it from any articles and
work in process for others in ChipPAC's custody or possession.
3. PURCHASE QUANTITY
3.1 Minimum Quantity Requirements.
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Years 1, 2 and 3. Intersil shall source one hundred percent (100%)
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of its requirements for both Packaging and Test Services and PDC Services for
both Existing Packages (excluding hermetic Packages, which shall be provided
pursuant to Section 7.9 of this Agreement) and New Packages (in accordance with
the right of first refusal to provide such Services for New Packages set forth
in Section 3.2) from ChipPAC during Year One, Year Two and Year Three.
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Intersil/ChipPAC Confidential
Years 4 and 5. During Year Four, Intersil shall source from ChipPAC a
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minimum of ninety percent (90%) of its requirements for Packaging and Test
Services and for PDC Services (determined by reference to Intersil's aggregate
purchases of all packaging and test services and of all product distribution
center services related to such packaging and test services from all Persons
during Year Four) for both Existing Packages (excluding hermetic Packages, which
shall be provided pursuant to Section 7.9 of this Agreement) and New Packages
(in accordance with the right of first refusal to provide such Services for New
Packages set forth in Section 3.2). During Year Five, Intersil shall source
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from ChipPAC a minimum of eighty percent (80%) of its requirements for Packaging
and Test Services and for PDC Services (determined by reference to Intersil's
aggregate purchases of all packaging and test services and of all product
distribution center services related to such packaging and test services from
all Persons during Year Five) for both Existing Packages (excluding hermetic
Packages, which shall be provided pursuant to Section 7.9 of this Agreement) and
New Packages (in accordance with the right of first refusal to provide such
Services for New Packages set forth in Section 3.2).
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Other Services. Services other than Packaging and Test Services and
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PDC Services (i) shall only be provided at Intersil's request for such Services
and (ii) shall not be included for purposes of determining whether Intersil has
met it minimum quantity requirements set forth in this Section 3.1.
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Exclusion from Minimum Quantity Requirements. Notwithstanding the
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foregoing, the minimum quantity requirements for Packaging and Test Services and
PDC Services for Products to which the following conditions apply shall be
excluded from the calculations of minimum requirements set forth in this Section
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3.1:
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(i) if ChipPAC does not offer Packaging and Test Services for any
applicable New Package at the Facility, or at any other facility owned or
operated by ChipPAC or any of its Affiliates, at the time such services are
initially required by Intersil; it being agreed that if ChipPAC begins to offer
Packaging and Test Services for one or more of such New Packages at any time
during the Term, and ChipPAC exercises its right of first refusal, if any, on
such New Packages in accordance with Section 3.2 (i.e., in the event Intersil
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has not entered into a long term third party supply agreement of the type
described in Section 3.2 or ChipPAC has a right of first refusal on secondary
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source Packages), any such New Packages shall be subject to the minimum quantity
requirements set forth in this Section 3.1 during the remainder of the Term;
(ii) if ChipPAC declines to provide Packaging and Test Services for an
applicable New Package (whether by expressly declining in writing to provide
such Packaging and Test Services or by mutual determination thereof by the
Parties within a reasonable time after Intersil's request for such Packaging and
Test Services);
(iii) if ChipPAC does not provide sufficient capacity on a reasonably
timely basis to satisfy Intersil's end customers' requirements;
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Intersil/ChipPAC Confidential
(iv) if Intersil is required by market conditions or Intersil customer
delivery requirements to provide to the customer quick turn packaging or test of
prototypes or design verification units or other exceptions mutually agreed to
by the Parties (e.g., a mutually agreeable pilot program) before ramping to
production quantities and ChipPAC cannot provide such services on a reasonably
timely basis, it being agreed that production quantities of any such Products
shall be subject to the minimum quantity requirements set forth in this Section
3.1 and the right of first refusal set forth in Section 3.2;
(v) back-end packaging or test services provided by any Acquired Business
(as defined below) for the internal use of such Acquired Business (as opposed to
providing such services to third parties or to all or any part of Intersil's
business, except for the Acquired Business), it being agreed that in the event
Intersil Holding Corporation or any of its controlled Affiliates consummate the
acquisition of an Acquired Business, the Parties shall confer and explore
mutually beneficial opportunities to transfer such business from Intersil to
ChipPAC (whether by purchase and sale of the relevant packaging or test
business, by supply arrangements or otherwise) (for purposes of this Section
3.1, "Acquired Business" shall mean any business acquired by Intersil Holding
Corporation or any of its controlled Affiliates, a portion of which may consist
of the business of providing back-end packaging or test services only for the
internal use of such business being acquired); or
(vi) any services that ChipPAC elects not to provide to Intersil or any
services that ChipPAC is not capable of providing to Intersil.
Notwithstanding anything to the contrary in this Section 3.1, if Intersil
is required by its end customer to establish and maintain a second source of
supply (which the Parties shall use best efforts to establish on a timely basis
by sourcing any such Product to any one or more of ChipPAC's other available
facilities), the Parties shall meet and develop a mutually agreeable solution to
any such second source requirement which cannot be satisfied by using another
qualified ChipPAC facility (including, without limitation, resolution of the
impact of any such second source requirement on Intersil's obligations pursuant
to this Section 3.1).
3.2 Right of First Refusal. During the Term of this Agreement, ChipPAC
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shall have a right of first refusal to provide Packaging and Test Services and
PDC Services on all of Intersil's New Packages. Intersil will provide ChipPAC
with timely notice of the type of package, the required date, the capacity
required, the lead time for production deliveries and any other limitations on
the New Packages imposed on Intersil by its customers. If ChipPAC can
substantially meet each of Intersil's requirements, including, but not limited
to, technical specifications, availability, capacity and qualification time,
Intersil shall place such business with ChipPAC, it being agreed that each of
the Parties shall work cooperatively and mutually assist the other Party to
enable each Party to fulfill their respective obligations on a timely basis and
any requirements with respect to any New Packages subject to this right of first
refusal (including, without limitation, by jointly planning and communicating
with respect to all such New Packages). The pricing on any such New Package
shall be at Meet Competitive Pricing. If ChipPAC is unable to meet such
requirements or declines to provide such New Package, Intersil may enter into a
long-term purchase agreement (which
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Intersil/ChipPAC Confidential
agreement shall prohibit such third party from publicly announcing that such
business has been sourced through such third party, unless required by law) for
the supply of such New Package and the test thereof with a third party who meets
the requirements delivered to ChipPAC (including, but not limited to, technical
specifications, availability, capacity and qualification time). In the event
Intersil enters into such an agreement with a third party, Intersil shall be
under no obligation to transfer the business for such New Package to ChipPAC.
Notwithstanding the foregoing, in the event Intersil decides to establish a
second source for any such New Package, Intersil shall be required to provide
ChipPAC with a right of first refusal with respect to such secondary source
Packages in compliance with this Section 3.2.
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3.3 Package Development. ChipPAC shall be Intersil's preferred supplier
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of new package development services; provided that ChipPAC is able to offer
price and performance standards for any such new packages that are at least
comparable to the price and performance standards offered by third parties. In
addition, ChipPAC's development time for new packages must be consistent with
Intersil's new product introduction schedules. ChipPAC and Intersil shall
conduct quarterly roadmap reviews of future package configurations throughout
the Term of this Agreement.
3.4 Location for Packaging and Test Services. ChipPAC shall have the
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right to provide Services for Intersil pursuant to this Agreement at the
Facility and/or at any other facility owned or operated by ChipPAC or any of its
Affiliates. Any Packaging and Test Service moves are subject to reasonable
qualification requirements of the facility in which the Packaging and Test
Services will be performed. No qualification shall be considered complete until,
where required, Intersil's customer qualification is complete and customer
approval has been received. Until such time as Intersil may consent (such
consent not to be unreasonably withheld or delayed), all Test Services shall be
provided at the Facility.
3.5 Subcontract Packages. ChipPAC shall have the exclusive right to
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provide Packaging and Test Services and PDC Services for all Subcontract
Packages which are transferred to ChipPAC pursuant to the terms and conditions
of Section 3.1 of the Stock Purchase Agreement and Schedule 3.1 thereto.
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3.6 Capacity Availability. Subject to adjustment from time to time
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pursuant to the following sentence, ChipPAC shall ensure that Intersil is
allocated 100% of the utilized capacity which was in place immediately prior to
the Effective Date, although such utilized capacity may be made available in any
ChipPAC facility that has been qualified to package and/or test Products, as
applicable. Intersil shall provide ChipPAC with the Weekly Production Plan (as
defined in Section 4.2) to support the continued allocation of such utilized
capacity to Intersil.
4. PURCHASE AND SALE
4.1 Purchase Orders. Intersil shall place orders for Packaging and Test
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Services and PDC Services by furnishing ChipPAC with documented blanket purchase
orders which will be used for billing purposes only and are not authorization
from Intersil to commit material resources into
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Intersil/ChipPAC Confidential
production. Authorization for production will be communicated from Intersil to
ChipPAC via the Firm Release Window (as defined in Section 4.2) in the Weekly
Production Plan (as defined in Section 4.2). In addition, Intersil shall provide
ChipPAC with blanket purchase orders for each of the other Services which will
be used for billing purposes only and are not authorization to commit resources
for such other Services. Authorization to commit resources to such other
Services will be communicated from Intersil to ChipPAC via the Firm Release
Window in the Weekly Production Plan or by separate Intersil request.
4.2 Production Plans and Firm Demand. Intersil shall provide ChipPAC with
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the following two types of production plans: (i) the aggregate production plan,
which shall provide a high level long range forecast which correlates to capital
expenditure lead times as the same may be adjusted from time to time, to be
provided on a quarterly basis or upon more frequent intervals as Intersil
determines to be consistent with any significant change in its capacity needs
(the "Aggregate Production Plan") and (ii) the weekly production plan, which
will provide a minimum 26 week rolling forecast of Intersil Product demand, by
part number, to be provided on a weekly basis or upon more frequent intervals as
Intersil may desire, which will also contain the "start date" (as required to be
calculated below) and Intersil's desired shipment date from the product
distribution center (the "Weekly Production Plan"). The Weekly Production Plan
shall be used both for (i) material planning purposes, it being agreed that
materials shall be ordered on the basis of the Weekly Production Plan, based on
material ordering lead times as the same may be adjusted from time to time
(which currently run approximately 60 days for the longest material lead time
item, leadframes) and (ii) scheduling of Packaging and Test Services, it being
agreed that ChipPAC shall only be authorized to release consigned Intersil
Wafers and Die into production and commence Packaging and Test Services on such
items on the "start date" listed in the Weekly Production Plan. The "start
date" means the last possible date on which services may be commenced on the
relevant Intersil Product, based upon the cycle time of the relevant Intersil
Product (as the same may be adjusted from time to time) plus seven (7) days, in
order to place such Product in the product distribution center in time to
satisfy Intersil's desired shipment date from the product distribution center.
Current average cycle times based on Products packaged and tested at the
Facility are twelve (12) days for IC packaging and test and five (5) days for
Power packaging and test. Packaging and Test Services commenced on or after the
"start date" shall be within the "Firm Release Window." Only quantities of
Product within the Firm Release Window will be considered firm demand.
4.2.1 Production Plan Transmission and Method. The Aggregate
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Production Plan will be provided quarterly in the quarterly reviews described in
Section 9 of this Agreement (or on a more frequent basis, consistent with any
significant changes in Intersil's forecasted capacity needs). The Weekly
Production Plan will be sent to ChipPAC on a weekly basis (or in more frequent
intervals as Intersil may desire) in one of the following formats, as determined
jointly by the Parties:
. Impress Planning System (or a functional equivalent).
. Fax or e-mail (should be used as a temporary option only).
. Electronic Data Interchange (EDI) via a third party network service
provider.
. Electronic Data Interchange via the Internet.
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Impress (or its functional equivalent) is Intersil's current preferred
option. Intersil believes that EDI is a future productivity and performance
enhancing option.
4.2.2 Weekly Production Plan Visibility. Intersil shall provide
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ChipPAC with Intersil's best commercially reasonable visibility of Product
demand. The actual horizon of production plan information sent to ChipPAC is
dependent on the visibility received from Intersil's customers, and may be
limited by systems or process constraints.
4.2.3 Firm Demand/ Planned Demand. Requirements of Intersil Product
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in the Weekly Production Plan that fall within the Firm Release Window will be
designated as "Firm Demand" and requirements of Intersil Product that fall
outside the Firm Release Window will be designated as "Planned Demand." The
intent of the Planned Demand and the Firm Demand is to allow changes in the
demand to be managed within the Weekly Production Plan, and to release
requirements for Product into production only within the Firm Release Window.
4.2.4 Upside Sprint Capacity. ChipPAC agrees to use its best
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efforts, consistent with available capacity, resources and materials
availability (but without any requirement to acquire additional equipment
capacity), to plan production to support an upside sprint capacity against the
immediately succeeding 16 weeks set forth in Intersil's Weekly Production Plan
from time to time (the "Upside"). Intersil's target Upside percentage of the
total quantity for the immediately succeeding 16 weeks in the Weekly Production
Plan from time to time is set forth in the Letter Agreement. The Upside
quantity available to Intersil is therefore determined by adding up the total
quantity forecast for the immediately succeeding 16 weeks in the Weekly
Production Plan from time to time and multiplying by the Upside percentage set
forth in the Letter Agreement. The target is to have the Upside available to
Intersil within the Firm Release Window, except to the extent that ChipPAC has
notified Intersil otherwise pursuant to Section 4.2.5.
4.2.5 Notification. ChipPAC shall notify Intersil of its firm
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commitment to Intersil's forecasted capacity for any month during the Term on or
about the 15/th/ day of the preceding month during the Term. ChipPAC is
responsible for notifying Intersil if ChipPAC is unable to support forecast
requirements inside the Weekly Production Plan. Intersil will assume that
ChipPAC can support one hundred percent (100%) of the requirements for the
Weekly Production Plan unless notified otherwise. Due to the short time windows
in the Firm Release Window, ChipPAC will notify Intersil no later than three
business days of receiving the Weekly Production Plan (with a target of
notifying Intersil no later than one business day of receiving the Weekly
Production Plan) if ChipPAC is unable to meet Firm Demand requirements. For
Planned Demand requirements, ChipPAC will notify Intersil within seven business
days of receiving the Weekly Production Plan if ChipPAC is unable to meet
Planned Demand requirements.
4.2.6 Liability of Forecast. The intent of this Agreement is for the
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Parties to jointly define and optimize opportunities to reduce both risk and the
liability of building requirements within the Weekly Production Plan. Except as
otherwise provided herein, Intersil shall be responsible for (i) all materials
and component products ordered on the basis of the Weekly
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Production Plan (based on the lesser of (A) 60 days and (B) material ordering
lead times as adjusted from time to time), (ii) all Packaging and Test Services
provided within the Firm Release Window and (iii) all Packaging and Test
Services provided in a shorter time frame than the Firm Release Window, to the
extent the same were requested by Intersil and (iv) all Packaging and Test
Services provided outside the Firm Release Window, to the extent Intersil
subsequently ships such Intersil Products from the product distribution center.
Notwithstanding the foregoing, if Intersil's requirements are subsequently
reduced, ChipPAC will use commercially reasonable efforts to mitigate Intersil's
liability through alternative use or sale of raw materials or component products
or other appropriate means, it being understood that (i) Intersil will at all
times be responsible for materials, work-in-process and finished Products within
the Firm Release Window and (ii) immediate billing for such Services will be
rendered upon completion of the relevant Services.
For standard raw materials and standard component parts (i.e., raw
materials and standard component parts which ChipPAC can use to provide
packaging and/or test services for other ChipPAC customers), Intersil's maximum
liability will only include the quantity released as Firm Demand within the Firm
Release Window. Intersil's liability for non-standard or unique raw materials
or component parts (i.e., raw materials and component parts which ChipPAC cannot
use to provide packaging and/or test services for other ChipPAC customers) shall
be based upon the material ordering lead times for such raw materials and
component parts, as adjusted from time to time (ordered on the basis of the
Weekly Production Plan).
4.2.7 Liabilities of ChipPAC. In the event any delivery of Product
----------------------
is or will be delayed as a result of ChipPAC not meeting its committed delivery
date confirmed in writing (or by electronic notification) by ChipPAC to Intersil
because of any action or inaction on the part of ChipPAC (other than any action
or inaction taken by ChipPAC at Intersil's direction or suggestion or due to any
Force Majeure event (as described in Section 14.4)) and such delay will
adversely impact Intersil's customer's delivery date, ChipPAC will pay for any
commercially reasonable expedite charges, including, without limitation, any
such special freight charges in order to reduce such delay.
4.3 Title Passage and Logistics Providers. Subject to Section 2.3, title
-------------------------------------
to the Products and risk of loss shall pass to Intersil upon completion of the
relevant Services (i.e, title and risk of loss shall pass to Intersil upon
completion of the Packaging Services and, separately, title and risk of loss
shall pass to Intersil upon completion of the Test Services). Any carrier used
to serve Intersil's needs shall be selected by Intersil, consistent with the
smooth operation of the product distribution center in accordance with past
practices, it being agreed that ChipPAC's expertise, manpower and cooperation
will be required to maintain a smooth shipment flow of Products. Subject to the
foregoing, ChipPAC will be obliged to follow Intersil's choice of logistic
providers and shipping/routing directives. Any delays incurred due to carrier
responsiveness (e.g., inadequate staffing by the carrier selected by Intersil)
shall be borne solely by Intersil.
4.4 Freight and Duty. The shipping locations of ChipPAC will utilize
----------------
Intersil designated contract carriers for the shipping of Intersil's Product.
Shipping costs, documentation, insurance
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Intersil/ChipPAC Confidential
costs, customs duties and other taxes shall be borne by Intersil. During Year
One, if ChipPAC elects to provide Packaging and Test Services for Existing
Packages or Subcontract Packages at a ChipPAC facility other than the Facility,
Intersil shall be charged for freight and duty for such Products as if such
Products had been shipped from the Facility, regardless of actual point of
shipment. With respect to New Packages, and with respect to any Existing
Packages or Subcontract Packages at any time after Year One, Intersil shall be
charged for freight and duty for such Products from the facility from which such
Product is shipped.
5. PRICE
5.1 Pricing of Existing Packages. The pricing (whether or not such
----------------------------
Services are provided at the Facility or any other facility owned or operated by
ChipPAC) for Packaging Services for all Existing Packages and for Test Services
for the Products described in the Letter Agreement shall be (except as otherwise
provided in the Letter Agreement with respect to such Test Services) (i) at Base
Unit Cost during Year One, Year Two and Year Three and (ii) at Meet Competitive
Pricing during Year Four and Year Five. The first such adjustment to Meet
Competitive Pricing (i.e., commencing at the beginning of Year Four) shall not
exceed 110% of the Base Unit Cost less discounts in effect with respect to such
Services (immediately prior to the transition to Meet Competitive Pricing), it
being agreed that if the aforementioned cap upon price increases would result in
ChipPAC providing Services at or below its total cost to provide such Services
(a "Loss Situation"), the Parties shall confer and work out a mutually
satisfactory arrangement to compensate ChipPAC for any such Loss Situation.
"Base Unit Cost" means the base unit costs of the Facility in effect as of the
Effective Date, estimates of which are set forth in the Letter Agreement;
provided that within 60 days of the Effective Date, such estimated Base Units
Costs shall be increased or decreased to reflect the Company's actual units
costs as of the Effective Date, as determined by reference to the Company's
books and records and verified by an independent accountant selected by ChipPAC
and reasonably acceptable to Intersil. Once actual Base Unit Costs are
determined, the Letter Agreement shall be updated to reflect such actual Base
Unit Costs.
5.2 Pricing of Subcontract Packages. The initial pricing for Packaging
-------------------------------
Services for all Subcontract Packages transferred to ChipPAC shall be the prices
set forth in the Letter Agreement. Such prices shall remain in effect during
the remainder of the Fiscal Year in which the Subcontract Package is transferred
to ChipPAC. On July 1, 2001 and each anniversary thereof during the Term, the
prices for Packaging Services of Subcontract Packages shall be reset at the
lesser of (i) the then-effective unit price therefor or (ii) the Most Favored
Customer Price therefor.
5.3 Test Pricing. Except as otherwise provided herein, pricing for Test
------------
Services for Existing Packages and for Subcontract Packages will be charged on a
test second of CPU time basis. The Parties shall confer and develop a mutually
agreeable schedule of test pricing no later than 30 days after the Effective
Date, which schedule shall be added to the Letter Agreement. Pricing for Test
Services for New Packages will be charged at Meet Competitive Pricing. Test
time reductions initiated and implemented by Intersil will accrue solely to the
benefit of Intersil. Intersil and ChipPAC will annually review test costs to
ensure they remain competitive. Intersil shall bear the
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Intersil/ChipPAC Confidential
cost of any device interface boards necessary to provide Test Services to
Intersil (it being agreed that ChipPAC shall procure such boards and charge back
the cost thereof to Intersil).
5.4 PDC Services; Restock Services. ChipPAC shall charge Intersil a unit
------------------------------
price adder for each unit of Product shipped. The unit price adder for PDC
Services shall be developed by the Company no later than 30 days after the
Effective Date and attached to the Letter Agreement. Such unit price adder for
PDC Services will consist of a combination of variable cost per unit of Product
plus fixed costs related to PDC Services, based on the Company's actual unit
costs to provide such services during the period from July 2, 1999 through and
including the Effective Date, as determined in accordance with United States
generally accepted accounting principles, consistently applied, by reference to
the Company's books and records and verified by both Parties and verified by an
independent accountant selected by ChipPAC (which independent accountant shall
be reasonably acceptable to Intersil).
ChipPAC shall charge Intersil a unit price adder for each unit of Product
returned by Intersil's customer and restocked into the product distribution
center (including the related reinspection work). The unit price adder for such
restock services shall be developed by the Company no later than 30 days after
the Effective Date and attached to the Letter Agreement. Such unit price adder
for restock services will consist of a combination of variable cost per unit of
restocked Product plus fixed costs related thereto, based on the Company's
actual unit costs to provide such services during the period from July 2, 1999
through and including the Effective Date, as determined in accordance with
United States generally accepted accounting principles, consistently applied, by
reference to the Company's books and records and verified by both Parties and
verified by an independent accountant selected by ChipPAC (which independent
accountant shall be reasonably acceptable to Intersil). During Year One, such
charges shall be made to Intersil on a product line reporting basis, it being
agreed that ChipPAC shall issue Intersil an equivalent credit for billing
purposes (i.e., there will be no net charge to Intersil for restock services
during Year One). The Parties agree that restock services shall be minimized
during Year One to commercially reasonable industry standards. Commencing in
Year Two, and throughout the remainder of the Term, ChipPAC shall charge
Intersil for such restocking services (without an equivalent credit), it being
agreed that commencing in Year Two, the Base Unit Costs of the relevant Intersil
products shall be adjusted to eliminate the costs attributable to such restock
services during the period from July 2, 1999 through and including the Effective
Date (as determined elsewhere in this second paragraph of this Section 5.4).
5.5 Unit Price Adders, Lot Charges and Fast Track Charges. Intersil shall
-----------------------------------------------------
pay the Unit Price Adders, Lot Charges and Fast Track Charges set forth in the
Letter Agreement, upon Intersil's request for such services. The Parties agree
that services for Lot Charges and Fast Track Charges shall be minimized during
Year One to commercially reasonable industry standards. The Letter Agreement
separately details Lot Charges and Fast Track Charges for "Products Currently
Assembled At KL Facility." During Year One, such Lot Charges and Fast Track
Charges for such "Products Currently Assembled At KL Facility" shall be made to
Intersil on a product line reporting basis, it being agreed that ChipPAC shall
issue Intersil an equivalent credit for billing purposes (i.e.,
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Intersil/ChipPAC Confidential
there will be no net charge to Intersil for Lot Charges and Fast Track Charges
for "Products Currently Assembled At KL Facility" during Year One).
5.6 Exchange Rate Fluctuations. For purposes of this Section 5.6, the
--------------------------
Parties' agreed upon pegged exchange rate is 3.80RM/US$ ("Agreed Upon Rate").
In order to allocate the risks and benefits of fluctuations from the Agreed Upon
Rate, the Parties agree that (i) ChipPAC will absorb any exchange rate
fluctuations from the Agreed Upon Rate down to 3.42RM/US$ and from the Agreed
Upon Rate up to 4.18RM/US$ (the "ChipPAC Band"), (ii) Intersil will absorb (A)
any incremental downward fluctuations in the exchange rate between 3.42RM/US$
and 3.04RM/US$ and (B) any incremental upward fluctuations in the exchange rate
between 4.18RM/US$ and 4.56RM/US$ (collectively, the "Intersil Band") and (iii)
the Parties shall each share 50% of (A) any further incremental downward
fluctuations in the exchange rate below 3.04RM/US$ and (B) any further
incremental upward fluctuations in the exchange rate above 4.56RM/US$ (the
"Shared Band"). For the purpose of calculating the dollar amount of the
exchange rate fluctuation to be absorbed by each Party, a current exchange rate
("Current Rate") will be established which will be the average of the RM/US$
exchange rate, as published in the Wall Street Journal, for the last business
day of each month of the quarter. The Current Rate will then be applied, on a
retroactive basis, to the Ringgit based costs incurred for the preceding quarter
and, if applicable, an invoice issued or credit issued to Intersil, as the case
may be.
If the Current Rate is less than the Agreed Upon Rate, ChipPAC shall
issue an invoice for Intersil's portion of the exchange rate adjustment, if any,
promptly after the close of the relevant quarter. If the Current Rate is
greater than the Agreed Upon Rate, ChipPAC shall issue a credit for Intersil's
portion of the exchange rate adjustment, if any, promptly after the close of the
relevant quarter. The exchange rate invoice or credit, if any, shall be
determined by comparing the sum of all Ringgit based costs incurred by ChipPAC
during the relevant quarter at the Current Rate to the sum of all Ringgit based
costs incurred by ChipPAC during the relevant quarter at the Agreed Upon Rate,
and then apportioning the total dollar amount of such exchange rate fluctuations
between the Parties pursuant to the principles set forth in the preceding
paragraph.
Example A. ChipPAC incurs Ringgit based costs of RM100 during the
---------
third calendar quarter of 2000. The Current Rate for such quarter is RM3.65/US$,
which is inside the ChipPAC Band. All such exchange rate fluctuations shall be
absorbed by ChipPAC.
Example B. ChipPAC incurs Ringgit based costs of RM100 during the
---------
third calendar quarter of 2000. The Current Rate for such quarter is RM3.20/US$,
which is inside the Intersil Band. The total exchange rate fluctuations are
$4.93 (RM100 @ 3.20/US$ minus RM100 @ 3.80/US$). ChipPAC shall absorb the first
$2.92 of such exchange rate fluctuation (RM100 @ 3.42/US$ minus RM100 @
3.80/US$). Intersil shall absorb the next $2.01 of such exchange rate
fluctuation (RM100 @ 3.20/US$ minus RM100 @ 3.42/US$).
Example C. ChipPAC incurs Ringgit based costs of RM100 during the
---------
third calendar quarter of 2000. The Current Rate for such quarter is RM3.00/US$,
which is inside the Shared Band.
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Intersil/ChipPAC Confidential
The total exchange rate fluctuations are $7.01
(RM100 @ 3.00/US$ minus RM100 @ 3.80/US$). ChipPAC shall absorb the first $2.92
of such exchange rate fluctuation (RM100 @ 3.42/US$ minus RM100 @ 3.80/US$).
Intersil shall absorb the next $3.65 of such exchange rate fluctuation (RM100 @
3.04/US$ minus RM100 @ 3.42/US$). The Parties shall each absorb 50% of the
remaining portion of the total exchange rate fluctuation of $0.44 (RM100 @
3.00/US$ minus RM100 @ 3.04/US$).
Example D. ChipPAC incurs Ringgit based costs of RM100 during the
---------
third calendar quarter of 2000. The Current Rate for such quarter is RM4.00/US$,
which is inside the ChipPAC Band. All such exchange rate fluctuations shall be
absorbed by ChipPAC.
Example E. ChipPAC incurs Ringgit based costs of RM100 during the
---------
third calendar quarter of 2000. The Current Rate for such quarter is RM4.20/US$,
which is inside the Intersil Band. The total exchange rate fluctuations are
$2.51 (RM100 @ 3.80/US$ minus RM100 @ 4.20/US$). ChipPAC shall absorb the first
$2.40 of such exchange rate fluctuation (RM100 @ 3.80/US$ minus RM100 @
4.18/US$). Intersil shall absorb the next $0.11 of such exchange rate
fluctuation (RM100 @ 4.18/US$ minus RM100 @ 4.20/US$).
Example F. ChipPAC incurs Ringgit based costs of RM100 during the
---------
third calendar quarter of 2000. The Current Rate for such quarter is RM4.60/US$,
which is inside the Shared Band. The total exchange rate fluctuations are $4.58
(RM100 @ 3.80/US$ minus RM100 @ 4.60/US$). ChipPAC shall absorb the first $2.40
of such exchange rate fluctuation (RM100 @ 3.80/US$ minus RM100 @ 4.18/US$).
Intersil shall absorb the next $1.99 of such exchange rate fluctuation (RM100 @
4.18/US$ minus RM100 @ 4.56/US$). The Parties shall each absorb 50% of the
remaining portion of the total exchange rate fluctuation of $0.19 (RM100 @
4.56/US$ minus RM100 @ 4.60/US$).
The provisions of this Section 5.6 shall only apply to Services
provided during the period from the Effective Date until June 30, 2003. The
parties agree that either Party may, from time to time, request changes to the
Agreed Upon Rate, subject to the other Party's approval.
5.7 Pricing Discounts.
-----------------
5.7.1 Target Revenues; Discounts. The annual target revenues to be
--------------------------
received by ChipPAC from Intersil pursuant to this Agreement for "Qualifying
Services" (as defined below) during Year One, Year Two and Year Three are set
forth in the Letter Agreement (the "Annual Revenue Targets").
Actual revenues received by ChipPAC for Qualifying Services will be
measured and compared to the aforementioned Annual Revenue Targets, and, with
respect to the pricing of Discount Eligible Services (as defined below),
Intersil shall be eligible to receive discounts in Year Two and Year Three
corresponding to the attainment of the relevant percentages of the Annual
Revenue Targets set forth in the Letter Agreement (and such discounts shall be
applied and paid as
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Intersil/ChipPAC Confidential
described therein). "Qualifying Services" means any of the Services described in
the Letter Agreement as such. "Discount Eligible Services" means any of the
Services described in the Letter Agreement as such. Services which are not
eligible for the discounts described herein shall be charged at the prices
indicated elsewhere in this Agreement, without regard to any discounts. In no
event will Qualifying Services include any reimbursements or pass-through
charges (e.g., ChipPAC's procurement and charge back of device interface boards
to Intersil).
5.8 Cumulation of Discounts. The discounts described in Section 5.7 are
-----------------------
cumulative. Accordingly, for purposes of computing net prices: (i) in Year Two,
Discount Eligible Services shall be priced at the scheduled Base Unit Cost, less
the presumed discount in Year Two (assuming Intersil attains greater than 100%
but less than 110% of the Annual Revenue Target), as adjusted after the end of
Year Two based on the comparison of actual revenues received from Qualifying
Services to the Year Two Annual Revenue Target and (ii) in Year Three, Discount
Eligible Services shall be priced at Base Unit Cost, less the actual discount
earned for Year Two (as finally determined pursuant to clause (i) above), less
the presumed discount in Year Three (assuming Intersil attains greater than 100%
but less than 110% of the Annual Revenue Target), as adjusted after the end of
Year Three based on the comparison of actual revenues received from Qualifying
Services to the Year Three Annual Revenue Target.
5.9 Payment Terms. Intersil shall pay ChipPAC the price due for Services
-------------
provided to Intersil pursuant to this Agreement in accordance with the Letter
Agreement. Xxxxxxxx for Services rendered shall be made by ChipPAC Limited to
Intersil Corporation.
5.10 Increase in Prices of Materials. In the event that the cost of
-------------------------------
providing the Services pursuant to this Agreement increases as a result of any
significant increase in the material costs required to provide such Services
(e.g., significant increase in gold costs), the Parties shall negotiate in good
faith a mutually agreeable mechanism to compensate ChipPAC for any such
significant increase in such material costs.
5.11 Pricing for Other Services. The pricing for specified Quality
--------------------------
Reliability Assurance Services shall be as set forth in the Letter Agreement.
The pricing for specified Bare Die/Wafer Preparation Services shall be developed
and mutually agreed upon by the Parties as soon as practicable following the
Effective Date and thereafter attached to the Letter Agreement, and shall be
based upon a combination of variable costs and the fixed costs to be incurred to
provide such services. Intersil shall consign to ChipPAC any and all equipment
necessary in order for ChipPAC to perform the Bare Die/Wafer Preparation
Services. Upon ChipPAC's request, Intersil shall provide ChipPAC with the
Engineering/QAR/Analytical Services specified in the Letter Agreement for the
prices specified therein.
6. CAPITAL EXPENDITURES; EQUIPMENT
6.1 Post-Closing CAPEX. From time to time subsequent to the Effective
------------------
Date, Intersil shall provide ChipPAC with appropriate documentary support of
Intersil's business justification for
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Intersil/ChipPAC Confidential
any additional packaging equipment, power test equipment or IC test equipment
(which the Parties envision shall be accomplished on a periodic basis by (i)
Intersil providing ChipPAC with the Weekly Production Plan specifying Intersil's
projected needs under this Agreement and (ii) at least quarterly formal
operations reviews to review additional capacity needs for Intersil business,
including review of the Aggregate Production Plan) which Intersil believes is
necessary to support Intersil's packaging and test requirements. Upon review of
any such business justification, ChipPAC shall have a right of first refusal
(which will be exercised or declined in accordance with the CAPEX Review
Procedures set forth in the Letter Agreement) to provide additional capacity to
support Intersil's growth in Products, it being acknowledged and agreed that, in
any event, ChipPAC will not be required to make further capital expenditures for
test equipment (whether pursuant to Section 6.1 or Section 6.2) unless ChipPAC
is also providing Packaging Services for the relevant Products. If ChipPAC
chooses not to provide such additional capacity, Intersil shall have the right
to obtain packaging and test services from a third party provider for any
additional capacity that is above and beyond ChipPAC's available capacity.
6.2 IC Test Equipment. With respect to any additional purchase of IC
-----------------
test equipment, from and after the Effective Date, Intersil shall purchase and
consign the first such tester (including handlers) to ChipPAC and ChipPAC shall
purchase the next such tester, such that each Party purchases one such tester
before the other Party shall be obligated to purchase another such tester.
ChipPAC understands Intersil's desire to avoid ownership of test equipment and
ChipPAC will entertain consideration of purchasing consigned testers upon
Intersil developing a track record of full use thereof. The test pricing
described in Section 5.3 shall be reduced upon Intersil's purchase and
-----------
consignment to ChipPAC of test equipment (and an updated Schedule reflecting
such reduced test pricing shall be mutually agreed upon by the Parties and
attached to the Letter Agreement) to eliminate depreciation charges with respect
to such consigned test equipment.
6.3 Unabsorbed CAPEX Commitments. If (i) ChipPAC intends to make capital
----------------------------
expenditures to be governed by this Section 6.3 (i.e., the Parties shall have
executed a separate writing indicating that particular capital expenditures are
to be governed by this Section 6.3), (ii) ChipPAC does in fact makes such
capital expenditures and (iii) Intersil fails to use all or a portion of such
equipped capacity, Intersil shall reimburse ChipPAC for the depreciation for
unused equipment capacity acquired by ChipPAC pursuant to this Section 6.3 plus
interest on the acquisition of such equipment at ChipPAC's weighted average
internal cost of capital. Any charge for unabsorbed depreciation and the
related cost of capital will be reduced by any such capacity used for other
ChipPAC customers. ChipPAC will use commercially reasonable efforts to find
customers to use such unused capacity.
6.4 Property of Intersil. Any equipment consigned to ChipPAC by Intersil
--------------------
("Intersil Consigned Equipment") shall at all times be the sole property of
Intersil, and ChipPAC shall have no property rights therein, but only the right
to use the Intersil Consigned Equipment upon the terms and conditions of this
Agreement. The Intersil Consigned Equipment shall be conspicuously marked as
being the property of Intersil. ChipPAC shall identify the Intersil Consigned
Equipment as being the property of Intersil in all of ChipPAC's internal
records. ChipPAC shall keep the Intersil
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Intersil/ChipPAC Confidential
Consigned Equipment free of levies, charges, liens and encumbrances and shall
protect such Intersil Consigned Equipment against ChipPAC's creditor claims, if
any, during the Term of this Agreement. Any Intersil Consigned Equipment shall
be consigned to ChipPAC in accordance with the terms and conditions of ChipPAC's
standard consigned equipment agreement, a copy of which is attached to the
Letter Agreement. The Parties acknowledge and agree that, all Intersil Consigned
Equipment, together with any other equipment consigned to ChipPAC by any of its
other customers, will be used by ChipPAC in the exercise of its good faith
judgment in order to provide the best available service to Intersil and to each
of ChipPAC's other customers and to otherwise maximize the efficiency of
ChipPAC's facilities, including, without limitation, in order to make available
to Intersil the upside sprint capacity described in Section 4.2.4 of this
Agreement.
6.5 Risk of Loss. Intersil shall bear all risks of loss or damage to the
------------
Intersil Consigned Equipment and with respect to any other property of Intersil
which is located on ChipPAC's premises or otherwise in ChipPAC's control
(whether inventory, device interface boards or other property), whether by fire,
theft, accident or other cause. Each of the Parties shall procure and maintain
in effect standard liability insurance covering risks due to fire, theft,
accident or other cause and personal injury in amounts customarily maintained by
each of the Parties to insure such risks. With respect to Intersil Product,
Intersil shall be responsible at all times for insuring the Die and Wafer
component of such product, and after title thereof has passed to Intersil, the
value added component of any Services provided by ChipPAC to Intersil pursuant
to this Agreement. Prior to such passage of title to Intersil, ChipPAC shall be
responsible to insure the value added component of such Services.
6.6 Operation in Accordance with Laws; Repairs. ChipPAC shall use
------------------------------------------
commercially reasonable efforts to use, operate and maintain the Intersil
Consigned Equipment in accordance with all applicable laws and regulations. All
replacements, repairs or accessories (including all third party maintenance and
spare part charges) made to or placed in or upon the Intersil Consigned
Equipment shall be borne by Intersil and shall be deemed a component part of the
Intersil Consigned Equipment and title thereto shall be vested in Intersil, it
being agreed that in order to avoid any duplication of charges with respect to
any such replacements, repairs or accessories, such charges shall be separately
invoiced to Intersil. ChipPAC shall not move, transfer, modify or alter the
Intersil Consigned Equipment without the consent of Intersil, except to the
extent necessary to comply with all applicable laws and regulations, including
but not limited to safety regulations.
7. COVENANTS; PERFORMANCE GOALS
7.1 Good Faith Efforts. ChipPAC shall use good faith efforts to provide
------------------
competitive technology, quality, responsiveness and on-time delivery to Intersil
and to otherwise achieve the competitive performance standards described in the
Letter Agreement, including, without limitation, by making sufficient sales and
technical personnel available to achieve such standards. Intersil shall
cooperate in good faith with ChipPAC and support ChipPAC in its efforts to
achieve such standards.
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Intersil/ChipPAC Confidential
7.2 Performance. ChipPAC will use commercially reasonable efforts to
-----------
provide competitive technology, quality, responsiveness and on-time delivery to
Intersil. Intersil and ChipPAC will mutually establish competitive performance
standards with respect to the aforementioned goals (and incorporate such
standards into the Letter Agreement, it being agreed that the Parties will
confer and establish the definitive performance standards contemplated by this
Section 7.2 in accordance with the procedures set forth in the following
sentence) and monitor progress against these standards. The schedule of
definitive performance standards to be developed and appended to the Letter
Agreement shall be completed and mutually agreed upon no later than August 1,
2000. ChipPAC and Intersil shall review and update these performance standards
semiannually on or about each January 1st and July 1st during the Term. Intersil
will work cooperatively to support ChipPAC and enable the competitive
performance required by such performance standards. In the event either Party
fails to fulfill its obligations with respect to such performance standards,
after exhaustion of mutually agreed upon notice and cure mechanisms described in
Section 13 and the Corrective Action Program described in Section 7.3, the other
Party may seek the remedies described in Section 13. ChipPAC will use its
discretion in changing processes and materials to improve cost performance,
consistent with Intersil's specifications (including customer location
approvals).
7.3 Corrective Action. If Intersil Product fails to consistently meet the
-----------------
performance standards established in accordance with Section 7.2, the Parties
-----------
agree that the senior management of each of the Parties, within two (2) business
days after written notice of such situation is given by Intersil to ChipPAC,
will commence discussions regarding the problem. The Parties will cooperate
fully and share all relevant information in attempting to resolve the situation.
If the Parties do not mutually agree after such discussions that the problems
have been resolved, Intersil may seek any of the remedies specified in Section
13 of this Agreement.
7.4 Failure Analysis. ChipPAC shall provide Intersil with failure
----------------
analysis reports of packaging failures within the same time frame as such
reports are currently provided by the Facility. For automotive and
telecommunications Products, line down conditions at Intersil's customer, and
other mutually agreed upon situations, ChipPAC shall provide failure analysis
reports on an expedited basis consistent with the time frame such reports are
currently provided by the Facility. Failure analysis reports shall be in the 8-
D format (or functional equivalent) unless otherwise mutually agreed upon by the
Parties. The Quality Reliability Assurance Services described in this Section
7.4 shall be charged in accordance with the Letter Agreement.
7.5 Quality. ChipPAC shall take necessary steps to maintain the
-------
Facility's QS-9000, ISO-9000, and ISO-14000 certifications, or any
certifications generally accepted by the semiconductor industry as a substitute
for such certifications. ChipPAC shall also take necessary steps to maintain the
Facility's military certification MIL-PRF-19500 and the Facility's compliance
with MIL PRF-38352, to the extent required to perform Services for Intersil's
Products. Any of ChipPAC's facilities other than the Facility which provide
Services for the Products shall also be certified to QS-9000, ISO-9000, and ISO-
14000, or equivalent. There shall be no charge to Intersil for any of ChipPAC's
obligations or services set forth in this Section 7.5.
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Intersil/ChipPAC Confidential
7.6 Burn-in. ChipPAC shall be responsible for supervising all burn-in
-------
activities conducted by third parties on behalf of the Facility (consistent with
the level of such supervision as of the Effective Date and which shall not
require ChipPAC to incur any capital expenditures with respect to any burn-in
ovens), it being agreed that Intersil shall issue any purchase orders required
to be delivered to any third party for such burn-in activities. The burn-in
ovens which were previously on the books of the Company prior to the Effective
Date were transferred to Parent or its designee in accordance with the terms and
conditions of the Stock Purchase Agreement. All burn-in boards (including,
without limitation, any Product specific burn-in boards or universal burn-in
boards) will be purchased and owned by Intersil. All third party costs incurred
by ChipPAC in support of burn-in will be billed to Intersil. Except as provided
in the immediately preceding sentence, there shall be no charge to Intersil for
any of ChipPAC's obligations or services set forth in this Section 7.6.
7.7 Product and Test Engineering Services. ChipPAC shall provide Intersil
-------------------------------------
with the Product and Test Engineering Services specified in the Letter
Agreement. Except as otherwise noted in the Letter Agreement, there shall be no
additional charge for the Product and Test Engineering Services. The Product
and Test Engineering Services shall be provided during the Term of this
Agreement, unless designated with the notation "ISIL Subcon Team" in the Letter
Agreement (in which event such services shall be provided during the periods
specified in the Letter Agreement). It is Intersil's intent to assume the
functions designated to be performed by the "ISIL Subcon Team" effective as of
July 1, 2000, it being agreed that in order to achieve the Parties' mutual goal
of protecting Intersil customers during Intersil's transition to a typical
subcontractor-customer relationship, ChipPAC will extend the time period for the
transitional Product and Test Engineering Services described in the Letter
Agreement for up to three (3) additional months, if required.
7.8 Production Planning and Control Services. ChipPAC shall provide
----------------------------------------
Intersil with the Production Planning and Control Services specified in the
Letter Agreement. There shall be no additional charge for the Production
Planning and Control Services. The Production Planning and Control Services
shall be provided during the transitional periods specified in the Letter
Agreement (which shall in no event exceed the nine (9) month period immediately
following the Effective Date), it being agreed that the Parties shall work
cooperatively to speed the transition of the Production Planning and Control
Services to Intersil personnel as soon as reasonably practicable. In
furtherance of the Parties' goal of transitioning these services to Intersil as
soon as reasonably practicable, each Party shall assign an appropriate Project
Manager to supervise such transition for such Party, and Intersil shall assemble
and maintain a Subcontract Product Team to supervise and carry out such services
as soon as reasonably practicable.
7.9 Hermetic Packaging. ChipPAC shall provide Packaging and Test Services
------------------
for Intersil for hermetic Products during the period from the Effective Date
until October 1, 2000, and thereafter shall not be required to provide such
Services, it being agreed that to the extent ChipPAC agrees to provide any such
services after October 1, 2000, such services shall be separately quoted
business after October 1, 2000. Intersil will be required, and will use its
commercially reasonable efforts, to transfer the hermetic Products to another
third party packaging contractor as soon as practicable
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Intersil/ChipPAC Confidential
following the Effective Date, it being agreed that ChipPAC shall work
cooperatively with Intersil to assist Intersil in the transfer of such hermetic
Products to another third party packaging contractor.
7.10 Qualification Requirement. The transfer of any Packages between
-------------------------
ChipPAC facilities shall be subject to a complete qualification of the packaging
and/or test process as provided in the purchase specifications to the Letter
Agreement. No qualification shall be considered complete until, where required,
Intersil's customer qualification is complete and customer approval received.
7.11 Operational Information. ChipPAC shall provide Intersil, at no
-----------------------
additional charge, with the various operational information the Company provided
to Intersil prior to Effective Date in the same manner (or equivalent), in the
same frequency and to the same level of detail for a transitional period to be
mutually agreed, moving to industry standard reporting protocols thereafter.
This information shall include, but is not limited to, engineering,
manufacturing and WIP tools for tracking and analysis. Management information
services data will include the following types of data:
7.11.1 parametric and bin data collected during package testing, and
lot-operation in and out quantities used to determine package
test yields;
7.11.2 lot-operation transactions that include such items as in and
out quantities, shipments, trace codes, date codes, splits,
merges and adjustments;
7.11.3 inventory and lot-operation transactions and product-route-
operation associations; and
7.11.4 ChipPAC shall provide sign-on access to Intersil (screened to
firewall confidential information of ChipPAC or its other
customers) to any system required to support Intersil's data
service needs.
Both Parties will work together in good faith to define and provide
operational data appropriate for Intersil's transition of its Packaging and Test
Services from a captive relationship to that of a subcontractor. In furtherance
of the foregoing, the Parties acknowledge and agree that they intend to
transition Intersil's requirements for operational data to an industry standard
system such as ChipPAC's "Customer Care System" as soon as reasonably
practicable following the Effective Date.
7.12 TO-39 Military and Other Military Can Product. Intersil will use
---------------------------------------------
commercially reasonable efforts to transfer all TO-39 Military and other
Military Can Product to another third party packaging contractor as soon as
practicable following the Effective Date. In the event Intersil is unable to
transfer such TO-39 Military and other Military Can Product, ChipPAC shall
provide Packaging and Test Services for Intersil for such Product during the
Term at the prices specified in the Letter Agreement.
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Intersil/ChipPAC Confidential
7.13 MOV Radial Product. Intersil is party to a contract with Littlefuse
------------------
pursuant to which Intersil is obligated to provide packaging and test services
to Littlefuse for MOV Radial Product until August 13, 2001. Intersil shall not
transfer or otherwise assign such Littlefuse contract to ChipPAC; provided that
ChipPAC shall provide Packaging and Test Services for MOV Radial Product during
the remainder of the term of such Littlefuse contract (as in effect as of the
date hereof), and such services shall be provided to Intersil at the prices
specified therefor in the Letter Agreement. Intersil will encourage Littlefuse
to transfer all MOV Radial Product to another third party packaging contractor
as soon as practicable following the Effective Date, it being acknowledged that
Littlefuse will not be contractually obligated to do so prior to August 13,
2001.
7.14 GE Fanuc Product. Intersil is party to a contract with General
----------------
Electric pursuant to which Intersil is obligated to provide packaging and test
services for GE Fanuc Product. ChipPAC shall provide Packaging and Test
Services for GE Fanuc Product during the Term, and such services shall be
provided to Intersil at the prices specified therefor in the Letter Agreement.
8. INTELLECTUAL PROPERTY RIGHTS
8.1 Grant of License in Intellectual Property Rights. During the Term,
------------------------------------------------
Intersil hereby grants, and shall cause any of its applicable Affiliates to
grant, to ChipPAC a royalty-free, non-exclusive license to use, with the right
to sublicense to ChipPAC's Affiliates, all intellectual property rights in the
bonding diagrams, Intersil unique bills of material, test programs and test
boards owned or licensed by Intersil or an Intersil Affiliate, and not included
among the intellectual property rights assigned or licensed to ChipPAC pursuant
to the Intellectual Property Rights Agreement executed on even date herewith,
which are necessary or desirable for ChipPAC to perform the Services for
Products in accordance with the terms and conditions of this Agreement. This
license grant is limited to use by ChipPAC and its Affiliates solely to perform
the Services for Intersil under this Agreement.
8.2 Grant of Trademark License. During the Term, Intersil hereby grants,
--------------------------
and shall cause any of its applicable Affiliates to grant, to ChipPAC a royalty-
free, non-exclusive license to use, with the right to sublicense to ChipPAC's
Affiliates, the Intersil trademarks listed in the Letter Agreement, for the
limited purpose of branding the Products and in connection with the packaging
and labeling of the Products. The branding of each Product shall be in
accordance with a Product specific branding diagram to be supplied by Intersil.
8.3 ChipPAC Inventions. All inventions and discoveries, whether or not
------------------
patentable, made by employee(s) of ChipPAC or its Affiliates in the course of
performance of this Agreement not using the Confidential Information (as defined
in Section 11.1) of Intersil (other than Residuals (as defined in Section
------------ -------
11.5)), and all intellectual property rights resulting therefrom, shall be the
----
sole and exclusive property of ChipPAC, and ChipPAC shall retain any and all
rights to file at its sole discretion any patent application thereon.
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Intersil/ChipPAC Confidential
8.4 Intersil Inventions. All inventions and discoveries, whether or not
-------------------
patentable, made by Intersil employee(s) in the course of performance of this
Agreement not using the Confidential Information of ChipPAC (other than
Residuals), and all intellectual property rights resulting therefrom, shall be
the sole and exclusive property of Intersil, and Intersil shall retain any and
all rights to file at its sole discretion any patent application thereon.
8.5 Joint Inventions. In the event ChipPAC and Intersil jointly make
----------------
inventions or discoveries, whether or not patentable, not using the Confidential
Information of either ChipPAC or Intersil (other than Residuals) in the course
of performance of this Agreement, then such joint invention shall be jointly
owned by ChipPAC and Intersil with each Party having the right to exploit and
grant licenses in respect to such inventions and any patents arising therefrom,
without the consent of or accounting to the other Party. In the event of a joint
invention, the Parties shall mutually agree which Party shall have the
responsibility for preparing and filing any patent application on the invention
and the Parties agree to execute documents required for, and equitably share in
the expenses associated with, obtaining and maintaining such patents. In the
event one Party elects not to seek or maintain patent protection for any joint
invention in any particular country or not to share equitably in the expenses
thereof with the other Party, that other Party shall have the right to apply for
or maintain such patent protection at its own expense in such country and shall
have full control over the protection and maintenance therefor, even though
title and rights to any patent resulting therefrom shall be jointly owned.
9. QUARTERLY REVIEWS
9.1 ChipPAC shall participate with Intersil in regularly scheduled
meetings to discuss capacity, Intersil test and packaging roadmaps and research
and development packaging development, Intersil capital needs, performance
goals, ChipPAC technology and equipment roadmaps, and other matters, and to
analyze, recommend, establish and implement action plans to help Intersil and
ChipPAC achieve their goals of continuous process improvements. ChipPAC shall
advise Intersil of planned cost reduction initiatives and/or process improvement
initiatives that materially impact Intersil, and Intersil will timely approve
any such cost reduction initiatives and/or process improvement initiatives which
comply with Intersil's Product specifications set forth in this Agreement and
the Letter Agreement. ChipPAC and Intersil agree to implement in a timely
fashion, any mutually agreed process improvements or cost reduction initiatives.
9.2 Quarterly reviews shall be held during the third week of the first
month of each quarter, and shall alternate between Intersil and ChipPAC
locations. Each Party shall be responsible for the expenses incurred by their
employees in attending the quarterly reviews.
10. AUDIT
10.1 Intersil Audit Rights. During the Term, ChipPAC will maintain complete
---------------------
and accurate records of the performance of its obligations under this Agreement.
Upon thirty (30) days written notice and not more often than once per calendar
year commencing July 1, 2001, Intersil may
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Intersil/ChipPAC Confidential
audit ChipPAC's books and records to ensure ChipPAC's compliance with the terms
and conditions of this Agreement. At Intersil's option or upon ChipPAC's written
demand, such audit will be performed by an independent third party at Intersil's
expense; provided, however, if any audit reveals that ChipPAC is not materially
complying with the terms of this Agreement, ChipPAC shall pay the costs of such
audit. The auditor shall keep the results of such audit confidential, and, if
conducted by a third party, any failure by ChipPAC to abide by the obligations
of this Agreement shall be reported to Intersil. At the end of the Term,
Intersil shall have the option of conducting a final end-of-term audit; if
Intersil does not avail itself of this option within thirty (30) days of the end
of the Term, such option shall expire.
10.2 ChipPAC Audit Rights. During the Term, Intersil will maintain complete
--------------------
and accurate records of the performance of its obligations under this Agreement.
Upon thirty (30) days written notice and not more often than once per calendar
year commencing July 1, 2001, ChipPAC may audit Intersil's books and records to
ensure Intersil's compliance with the terms and conditions of this Agreement. At
ChipPAC's option or upon Intersil's written demand, such audit will be performed
by an independent third party at ChipPAC's expense; provided, however, if any
audit reveals that Intersil is not materially complying with the terms of this
Agreement, Intersil shall pay the costs of such audit. The auditor shall keep
the results of such audit confidential, and, if conducted by a third party, any
failure by Intersil to abide by the obligations of this Agreement shall be
reported to ChipPAC. At the end of the Term, ChipPAC shall have the option of
conducting a final end-of-term audit; if ChipPAC does not avail itself of this
option within thirty (30) days of the end of the Term, such option shall expire.
11. CONFIDENTIALITY
11.1 Confidential Information. Confidential Information is any information
-------------------------
disclosed by one Party to the other in connection with this Agreement or the
Letter Agreement, which the disclosing Party believes to include confidential
information, is designated with an appropriate legend such as "CONFIDENTIAL" (or
other label indicating its confidential nature or status) at the time of
disclosure if in documentary or other tangible form, and if such disclosure is
initially oral or visual and not reduced to written or documentary form at the
time of disclosure, is identified as confidential at the time of disclosure,
summarized or identified in a written document that is marked with an
appropriate legend indicating its confidential status, and provided to the other
Party within twenty (20) days following such oral or visual disclosure. For each
item of Confidential Information, the Party disclosing the item shall be called
the "Disclosing Party," and the Party receiving the item shall be called the
"Receiving Party." Notwithstanding the foregoing, all Product bonding diagrams,
Product specific bills of materials, Intersil product specific test hardware
designs, custom contactor designs, Intersil RF test technology methods and
designs, and test programs owned by Intersil will be considered Confidential
Information, whether or not so marked.
11.2 Confidentiality Obligation. The Receiving Party shall hold all
---------------------------
Confidential Information of the Disclosing Party in trust and confidence, and
protect it as the Receiving Party would protect its own confidential information
(which, in any event, shall not be less than reasonable
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Intersil/ChipPAC Confidential
protection) and shall not use such Confidential Information for any purpose
other than that contemplated by this Agreement and the Letter Agreement. Unless
agreed by the Disclosing Party in writing, the Receiving Party shall not
disclose any Confidential Information of the Disclosing Party, by publication or
otherwise, to any person other than employees, officers or directors who (i) are
bound to written confidentiality obligations consistent with and at least as
restrictive as those set forth herein and (ii) have a need to know such
Confidential Information for purposes of enabling a Party to exercise its rights
and perform its obligations pursuant to this Agreement or the Letter Agreement.
Confidential Information shall remain confidential information until such time
as it qualifies for non-confidential treatment pursuant to any exception set
forth in Section 11.3.
------------
11.3 Exception. The obligations specified in Section 11.2 shall not apply
---------- ------------
to any Confidential Information to the extent that the Receiving Party can
demonstrate that such Confidential Information: (a) is already known to the
Receiving Party without restriction prior to the time of disclosure by the
Disclosing Party; (b) is acquired by the Receiving Party from a third party
without confidentiality restriction and does not originate with the Disclosing
Party; (c) is independently developed or acquired by the Receiving Party by
employees or contractors without access to such Confidential Information; (d) is
approved for release by written authorization of the Disclosing Party; (e) is in
the public domain at the time it is disclosed or subsequently falls within the
public domain through no wrongful action of the Receiving Party; or (f) is
furnished to a third party by the Disclosing Party without a similar restriction
on that third party's right of disclosure. Notwithstanding the fact that
Intersil Product specifications, Product bonding diagrams, test programs or
bills of materials may come within one of the above exceptions, such information
will remain Confidential Information. In addition, the obligations specified in
Section 11.2 shall not prohibit either Party from disclosing or filing this
------------
Agreement or the Letter Agreement if required by applicable statute or in
connection with any required filing with the SEC; it being agreed that with
respect to the Letter Agreement, if either Party concludes that it is required
by applicable statute or by requirement of the SEC to file or disclose the
Letter Agreement, such Party shall use best efforts to obtain confidential
treatment for all information included therein.
11.4 Compelled Disclosure. Notwithstanding the foregoing (but subject to
--------------------
each Party's obligations to use best efforts for confidential treatment of the
information included in the Letter Agreement), a Receiving Party may disclose
Confidential Information if it is disclosed pursuant to the requirement of a
governmental agency or disclosure is required by operation of law, provided that
the Receiving Party use its best efforts to notify the Disclosing Party in
advance of such disclosure and seeks confidential treatment for such
Confidential Information.
11.5 Residual Information. The restrictions regarding Confidential
--------------------
Information shall not apply to one Party's use of the Residuals from the other
Party's Confidential Information. The term "Residuals" as used in this Section
---------
shall mean the Confidential Information in intangible form (i.e., not in written
or other documentary form, including tape or diskette) which may be retained by
those employees of ChipPAC or Intersil who have had access to the other's
Confidential Information in the ordinary performance of their work
responsibilities, including ideas, concepts, know-how, or techniques contained
therein. Neither Party shall have any obligation to limit or restrict the
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Intersil/ChipPAC Confidential
assignment of such employees or to pay royalties for any work resulting from the
use of such Residuals. Residuals shall not include any individual's knowledge
obtained solely for the purpose of reducing written information (or oral or
visual information summarized or identified in a written document pursuant to
Section 11.1) disclosed as confidential information to an intangible form.
------------
11.6 Subcontractor Confidential Information. ChipPAC acknowledges that the
---------------------------------------
employees of the Company were entrusted with Confidential Information of
Intersil's subcontractors and are required by their employment agreement with
the Company to maintain such information confidential. ChipPAC agrees to assist
said employees in performing their contractual obligations and maintaining said
information confidential by not requesting any such employee to disclose such
information, even though such information might be classified as a Residual.
12. WARRANTIES AND INDEMNIFICATION
12.1 Mutual Warranties. Each Party hereby represents and warrants to the
-----------------
other that: (i) all corporate action on the part of such Party, its officers,
directors and shareholders necessary for the authorization of this Agreement and
the Letter Agreement and the performance of all obligations of such Party
hereunder and thereunder has been taken; (ii) this Agreement and the Letter
Agreement, when executed and delivered, will be a valid and binding obligation
of such Party enforceable in accordance with its terms; (iii) this Agreement,
the Letter Agreement and such Party's performance hereunder and thereunder does
not and will not violate any agreement existing between such Party and any third
party; and (iv) any information provided by either Party to the other in this
Agreement and the Letter Agreement is true and correct.
12.2 Warranties of ChipPAC. ChipPAC warrants to Intersil only that, for a
---------------------
period of twelve (12) months following shipment thereof, ChipPAC will remedy, in
accordance with the provisions hereof, any defect in material or workmanship in,
or failure to conform to the agreed upon specifications of, the Services or, at
ChipPAC's option, provide a credit therefor. Intersil shall not issue any
warranties or guarantees with respect to the Products to any person or party
which in any way obligates or purports to obligate ChipPAC to any person or
party.
In the event that Intersil is able to submit proof of the existence of
defects in material or workmanship in, or nonconformance to the agreed upon
specifications of, any Services, Intersil shall as a condition to ChipPAC's
obligations hereunder, promptly, but in no event more than thirty (30) days
after discovery thereof, submit to ChipPAC for ChipPAC's inspection, the
affected Products along with such proof, at ChipPAC's expense, F.O.B. point of
shipment. In the event that ChipPAC shall confirm that defects in, or
nonconformance to the agreed upon specifications of, any of the Services covered
by the foregoing warranty have occurred within the applicable warranty period,
ChipPAC shall provide replacement Services equal to the purchase price of the
defective or nonconforming Services or, at ChipPAC's option, provide a credit
therefor. Notwithstanding anything to the contrary in this Section 12.2, ChipPAC
------------
shall have no obligation for any defects in, or nonconformances of, Products
that have been caused: (a) by Intersil's shipment or storage thereof; (b) by
articles, services and/or information not supplied by ChipPAC; (c) by articles,
services and/or
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Intersil/ChipPAC Confidential
information supplied at Intersil's request outside the scope of this Agreement;
or (d) by accident, misuse, neglect, abuse, mishandling, misapplication,
modification, alteration, acts of God or improper installation by any party
other than ChipPAC.
12.3 Disclaimer. THE WARRANTIES SET FORTH IN SECTIONS 12.1 AND 12.2 ARE
---------- ------------- ----
EXCLUSIVE AND ARE IN LIEU OF ALL OTHER WARRANTIES, WHETHER ORAL OR WRITTEN,
EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY AND OF FITNESS
FOR A PARTICULAR PURPOSE, ALL OF WHICH ARE HEREBY DISCLAIMED BY CHIPPAC. The
employees and agents of ChipPAC are not authorized to make modifications to such
warranties, or additional warranties binding on ChipPAC; accordingly, additional
statements, whether oral or written, do not constitute warranties and should not
be relied upon by Intersil.
12.4 Limitation of Liability. ChipPAC's liability under the warranty set
-----------------------
forth in Section 12.2 shall be limited solely to the cost of any replacements of
------------
the defective Services (excluding, for avoidance of doubt, the cost of the Die
and Wafer with respect to any affected Products), and ChipPAC assumes no risk
of, and shall not in any case be liable for, any other damages, including,
without limitation, any special, incidental, consequential or punitive damages,
arising from breach of warranty or contract, negligence or any other legal
theory, including, without limitation, loss of goodwill, profits or revenue,
loss of use of the Products or any associated equipment, cost of capital, cost
of any substitute equipment, facilities or services, downtime costs, or claims
of any party against Intersil for such damages.
12.5 Time Limitation. No suit shall be brought on an alleged breach of
---------------
the warranty set forth in Section 12.2 more than one (1) year following
------------
expiration of the applicable warranty period.
12.6 Risk Allocation. The warranty set forth in Section 12.2 allocates
--------------- ------------
the risks of Product failure between the Parties hereto, as authorized by the
Uniform Commercial Code and other applicable law. ChipPAC's pricing of the
Services reflects this allocation of risk and the limitations of liability
contained in this Agreement.
12.7 Indemnification by Intersil. Intersil shall indemnify and hold
---------------------------
harmless ChipPAC and its officers, directors and Affiliates against any damages
incurred as a result of Intersil's marketing, use or sale of the Products,
including without limitation any claims for infringement or misappropriation of
intellectual property rights due to any such marketing, use or sale, except to
the extent resulting from ChipPAC's packaging and test methods.
12.8 Indemnification by ChipPAC. ChipPAC shall indemnify and hold
--------------------------
harmless Intersil and its officers, directors and Affiliates against any damages
incurred as a result of any claims for infringement or misappropriation of
intellectual property rights due to ChipPAC's packaging and test methods.
13. TERM AND TERMINATION
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Intersil/ChipPAC Confidential
13.1 Term. This Agreement and the Letter Agreement shall commence on the
----
Effective Date and shall continue for an initial term ending June 30, 2005 (the
"Initial Term"). This Agreement and the Letter Agreement shall automatically
renew for additional one (1) year terms on the terms and conditions then in
effect immediately prior to the commencement of any such renewal term (each a
"Renewal Term") unless either party provides written notice to the other party
of its intention not to renew the Agreement and the Letter Agreement at least
180 days prior to the end of the Initial Term or any subsequent Renewal Term.
13.2 Termination. Either Party shall have the right to terminate this
-----------
Agreement and the Letter Agreement under the following conditions: (a) mutual
agreement between the Parties; and (b) subject to Sections 13.3 through 13.6,
------------- ----
upon material breach of this Agreement or the Letter Agreement by the other
Party. Either Party shall have the right to terminate this Agreement and the
Letter Agreement upon written notice to the other Party in the event the
notified Party ceases to carry on business, becomes or is declared insolvent,
files or has filed against it a petition in bankruptcy (which has not been
dismissed within 60 days of filing), has a receiver appointed over its assets,
or takes or has taken against it any similar act as a result of debt.
13.3 Resolution of Disputes. It is the intent of the Parties that any
----------------------
breach of this Agreement or the Letter Agreement be resolved in an amicable
manner, to the fullest extent possible, and that any such resolution be
reasonable in light of the rights and obligations of the Parties. If any breach
should arise which cannot be resolved by the personnel of each Party directly
involved, the following procedures of Sections 13.4 through 13.6 shall apply in
------------- ----
each of the circumstances described below.
13.4 Cure. Subject at all times to the Corrective Action Program
----
described in Section 7.3 (which the Parties acknowledge and agree shall be the
preferred option for resolving and rectifying time sensitive and other critical
path items), if either Party shall at any time materially breach this Agreement
or the Letter Agreement, without material causative fault on the part of the
other Party, by failing to perform or otherwise abide by any material provision
of this Agreement or the Letter Agreement, the non-breaching Party may advise of
its intention to terminate this Agreement and the Letter Agreement by providing
written notice to the breaching Party specifying the breach. The Agreement and
the Letter Agreement will not be terminated if (i) the material breach specified
in the notice is remedied within the sixty (60) day period following receipt of
the notice by the breaching Party or (ii) if the breach reasonably requires more
than sixty (60) days to cure, the breaching Party has, within thirty (30) days
from receipt of the notice of breach, begun substantial corrective action to
cure the breach and submitted a written remediation plan to the non-breaching
Party providing a detailed explanation of the steps to be taken to cure the
breach as quickly as practicable, the breaching Party diligently pursues such
corrective action, and such breach is actually cured within ninety (90) days
following receipt of the notice of breach. If any breach is not cured within the
time permitted (and not resolved pursuant to the Conciliation Process), the non-
breaching Party shall have the right to terminate this Agreement and the Letter
Agreement at any time thereafter by giving written notice of termination to the
other Party, and upon the giving of such notice, this Agreement and the Letter
Agreement shall terminate immediately or, if Intersil is the
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Intersil/ChipPAC Confidential
non-breaching Party, Intersil shall have the right to purchase packaging and
test services from a third party with respect to any Packaging or Test Services
that are the subject of the breach notice until such time as ChipPAC is able to
cure its breach with respect to such Services. In the event of any breach, the
non-breaching Party shall have the right to suspend further implementation or
effectuation of that portion of its obligations under this Agreement and the
Letter Agreement related to any such breach, and shall not be obligated to
resume such activities until such breach has been cured. This Section 13.4
------------
shall run concurrently with the Conciliation Process set forth in Section 13.5
------------
below.
13.5 Conciliation Process. At any time during the Term, upon the
--------------------
occurrence of one or more breaches under this Agreement or the Letter Agreement,
the non-breaching Party shall promptly deliver written notification to the
alleged breaching Party setting out in reasonable detail and in clear and
concise language the good faith basis for and the specifics of such breach. If
the breaching Party has not cured such breach within sixty (60) days after
delivery of such written notification, a Coordinating Committee consisting of
Project Coordinators of each Party shall be established and shall convene a
meeting within ten (10) days thereafter for the purpose of, among other things:
(i) assessing the good faith basis for the claimed breach, (ii) defining,
assessing and prioritizing the alternatives reasonably available to cure such
breach or to correct the circumstances or situations that gave rise to such
breach so as to make its reoccurrence unlikely and (iii) adopting by unanimous
vote, one or more curative or corrective courses of action (the "Proposed
Resolution").
Either the breaching Party or the non-breaching Party shall be
entitled to make reasonable requests for information ("Information Requests")
pertaining to the breach (provided such requests are not unduly burdensome and
can be accomplished within three (3) days) and present its views to the
Coordinating Committee with respect to the breach through its appropriate
officer ("Presentation"). If within five (5) days of its first meeting, the
Coordinating Committee shall be unable to resolve the breach by unanimous vote,
then the matter shall immediately be referred to an advisory committee
consisting of the President of each of the Parties and two additional personnel
of their choice, one each from ChipPAC and Intersil (the "Advisory Committee")
for further attempts at resolution. Within ten (10) days of such referral, the
Advisory Committee shall convene a meeting for the purpose of attempting to
resolve the breach. The procedures described above concerning Information
Requests and Presentation shall also apply to the Advisory Committee. The
process described in this Section 13.5 is referred to as the "Conciliation
------------
Process."
13.6 Remedies. Subject to Sections 13.3 through 13.6, upon the failure to
--------
cure a material breach of this Agreement or the Letter Agreement by either
Party, the non-breaching Party shall have the right to pursue all available
remedies at law or in equity that it may elect, including but not limited to
specific performance or injunctive relief, in order to obtain the benefits it
has been provided pursuant to this Agreement and the Letter Agreement or to
obtain adequate recourse or compensation in the event the same are not so
provided.
13.7 Return of Documents and Materials. Upon expiration or termination of
---------------------------------
this Agreement and the Letter Agreement, each Party shall, at its own expense,
return to the other Party
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Intersil/ChipPAC Confidential
all documents or materials comprising or containing the other Party's
Confidential Information and thereafter shall not use any of such Confidential
Information.
13.8 Return of Intersil Consigned Equipment and Property. Upon expiration
---------------------------------------------------
or termination of this Agreement and the Letter Agreement, ChipPAC shall deliver
the Intersil Consigned Equipment and all other Intersil property and inventory,
at Intersil's expense, to a destination specified by Intersil, complete and in
good condition, reasonable wear excepted. Notwithstanding the foregoing, upon
termination or expiration of this Agreement and the Letter Agreement, Intersil
is hereby authorized to enter upon any premises where the Intersil Consigned
Equipment may be found and take possession of and remove such Intersil Consigned
Equipment.
13.9 Continued Effectiveness. Termination of this Agreement and the
-----------------------
Letter Agreement shall be without prejudice to any rights or liabilities of any
Party accrued at the date of termination and shall not affect the continued
effectiveness of Sections 5.7, 5.9, 8.3, 8.4, 8.5, 10.1, 10.2, 11, 12.2, 12.3,
------------ --- --- --- --- ---- ---- -- ---- ----
12.4, 12.5, 12.6, 12.7, 13.3, 13.4, 13.5, 13.6, 13.7, 13.8, 13.10, 13.11 and
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----- -----
14.2 hereof.
----
13.10 Amounts Owed at Termination. Upon termination of this Agreement and
---------------------------
the Letter Agreement, all sums owing shall be immediately due and payable.
13.11 No Liability for Loss of Anticipated Business Upon Expiration.
-------------------------------------------------------------
Neither Party shall be liable to the other Party by reason of the expiration of
this Agreement and the Letter Agreement (as opposed to the termination of this
Agreement and the Letter Agreement) in accordance with its terms because of loss
of anticipated business or because of investments related to the business or
goodwill of the Parties. Termination in accordance with this Agreement and the
Letter Agreement shall be without prejudice to any of the rights or liabilities
of any Party accrued at the date of termination.
14. MISCELLANEOUS
14.1 Merger, Modification, Waiver. This Agreement and the Letter
----------------------------
Agreement contain the entire understanding between Intersil and ChipPAC with
respect to the subject matter hereof, and merges and supersedes all prior and
contemporaneous agreements, dealings and negotiations. No modification,
alteration or amendment of this Agreement or the Letter Agreement shall be
effective unless made in writing, dated and signed by duly authorized
representatives of both Parties. No waiver of any breach of this Agreement or
the Letter Agreement shall be held to be a waiver of any other or subsequent
breach.
14.2 Jurisdiction and Choice of Law. Any claim arising under or relating
------------------------------
to this Agreement or the Letter Agreement shall be governed by the internal
substantive laws of the State of New York or federal courts located in New York,
without regard to principles of conflict of laws. Each Party hereby submits to
the co-exclusive jurisdiction of the United States District Court located in the
City of New York, Borough of Manhattan and any state court located therein for
all disputes and litigation under or relating to this Agreement or the Letter
Agreement and waives any objection
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based on venue or forum non conveniens with respect to any action instituted
therein. Each Party hereby waives the necessity for personal service of any and
all process upon it and consents that all such service of process may be made by
registered or certified mail (return receipt requested), with a copy also being
sent by facsimile (with receipt confirmed), in each case directed to such Party
at its address set forth in, and with copies sent as required by, Section 14.6
of this Agreement, and service so made shall be deemed to be completed on the
date of actual receipt. Each Party hereby consents to service of process as
aforesaid. Nothing in this Section 14.2 will prohibit personal service in lieu
of the service by mail contemplated herein.
14.3 Relationship of the Parties. Neither this Agreement nor the Letter
---------------------------
Agreement is intended to be, nor shall they be construed as an association,
partnership, franchise or other form of business relationship. Neither Party
shall have nor hold itself out as having any right or power or authority to
assume, create, or incur any expense, liability or obligation, expressed or
implied, on behalf of the other Party, except as expressly provided in this
Agreement or the Letter Agreement. Except as expressly agreed, each Party shall
bear its own costs and expenses incurred under or in conjunction with its
performance of its obligations contained in this Agreement and the Letter
Agreement.
14.4 Force Majeure. Any failure or omission by a Party in the performance
-------------
of any obligation under this Agreement or the Letter Agreement shall not create
any liability under this Agreement or the Letter Agreement, if the same arises
from any cause or causes beyond the control of such Party, including, but not
limited to, the following, which, for purposes of this Agreement and the Letter
Agreement shall be regarded as beyond the control of each of the Parties hereto:
acts of God, fire, storm, flood, earthquake, governmental regulation or
direction, acts of the public enemy, war, rebellion, insurrection, riot,
invasion, strike or lockout; provided that such Party shall resume the
performance whenever such causes are removed.
14.5 Assignment. Except as set forth below, neither this Agreement, the
----------
Letter Agreement nor any Party's rights or obligations set forth in this
Agreement or the Letter Agreement may be assigned, delegated or otherwise
transferred to any third party without the prior written consent of the other
Party. Notwithstanding the foregoing, (i) either Party may assign any of its
rights or obligations under this Agreement (and such Party's corresponding
rights and obligations under the Letter Agreement) to any of its Affiliates or
for collateral security purposes to a lender providing financing to such Party
or its Affiliates and (ii) each Party must assign that portion of its rights and
obligations under this Agreement (and such Party's corresponding rights and
obligations under the Letter Agreement) to any third party that acquires all or
any portion of its assets, capital stock or business to which this Agreement and
the Letter Agreement relates, it being agreed that no assignment shall relieve
either of the Parties from any of its obligations under this Agreement or the
Letter Agreement.
14.6 Notices. All notices, demands, consents or other communications
-------
required or permitted under this Agreement or the Letter Agreement shall be in
writing and shall be deemed to have been given when personally delivered, sent
by reputable overnight courier or transmitted by
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Intersil/ChipPAC Confidential
facsimile or telecopy, to the addresses indicated below (unless another address
is specified in writing):
If to Intersil, to:
------------------
Intersil Corporation
0000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
--------------
Intersil Corporation
0000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Facsimile No.: (000) 000-0000
If to ChipPAC, to:
-----------------
ChipPAC Limited
Xxxxxxxxx Xxxxxxxx
Xxxx Xxxx, Xxxxxxx
Xxxxxxx Xxxxxx Xxxxxxx
Attention: Xxxxxxx Xxxxxxx -- Resident Director
Facsimile No.: (000) 000-0000
with a copy to:
--------------
ChipPAC, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx
Facsimile No.: (000) 000-0000
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Intersil/ChipPAC Confidential
and to:
------
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, P.C.
Xxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
14.7 Severability. The provisions of this Agreement and the Letter
------------
Agreement are severable and if any one or more such provisions shall be
determined to be invalid, illegal or unenforceable, in whole or in part, the
validity, legality and enforceability of any of the remaining provisions or
portions thereof shall not in any way be affected or impaired thereby and shall
nonetheless be binding between the Parties hereto.
14.8 Titles and Headings. Titles and headings to Sections herein are
-------------------
inserted for convenience of reference only and are not intended to affect the
meaning or interpretation of this Agreement.
14.9 Non-Solicitation. During the Term of this Agreement and for one year
-----------------
thereafter each Party agrees not to solicit or hire any employee of the other
Party who came to the attention of the non-employer Party through the
performance of this Agreement or the sale of the Facility by Intersil to ChipPAC
without the employing Party's written consent (including, in the case of
Intersil, soliciting or hiring any such employee of the Company without
ChipPAC's consent). Nothing in this Agreement shall impair Intersil's right to
hire any of the employees listed on the Transferred Employees Schedule to the
------------------------------
Stock Purchase Agreement or, with the prior written consent of ChipPAC (which
may be withheld in its absolute discretion), any other employee of the Company
to establish a team for Intersil to manage its subcontracted product functions.
14.10 Counterparts. Each of this Agreement and the Letter Agreement may
------------
be executed in multiple counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same instrument (any one or more
of which may be executed and delivered by facsimile transmission).
* * * * *
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Intersil/ChipPAC Confidential
IN WITNESS WHEREOF, the Parties have caused this Supply Agreement to
be executed by duly authorized officers or representatives to be effective as of
the Effective Date.
Intersil Corporation ChipPAC Limited
By: /s/ Xxx Xxxx By: /s/ Xxxxxx St. Xxxxx-Xxxxxxx
_______________________________ _______________________________
Name: Xxx Xxxx Name: Xxxxxx St. Xxxxx-Xxxxxxx
Title: Vice President Title: Power of Attorney
