WAFER SUPPLY AND SERVICES AGREEMENT among: SPECIALTYSEMI, INC., a Delaware corporation; and CONEXANT SYSTEMS, INC., a Delaware corporation Dated as of March 30, 2002
Exhibit 10.11
WAFER SUPPLY AND SERVICES AGREEMENT
among:
SPECIALTYSEMI, INC.,
a Delaware corporation;
and
CONEXANT SYSTEMS, INC.,
a Delaware corporation
Dated as of March 30, 2002
Confidential treatment is being requested for portions of this document. This copy of the document filed as an exhibit omits the confidential information subject to the confidentiality request. Omissions are designated by the symbol [...***...]. A complete version of this document has been filed separately with the Securities and Exchange Commission.
TABLE OF CONTENTS
1. |
1 | ||
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1.1 |
“Affiliate” |
1 |
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1.2 |
“Basic Price” |
1 |
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1.3 |
“Capacity” |
1 |
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1.4 |
“Conexant Spin-off” |
1 |
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1.5 |
“Contract Price” |
2 |
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1.6 |
“Current Average Probe Yield |
2 |
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1.7 |
“Delivery Note” |
2 |
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1.8 |
“Engineering Wafers” |
2 |
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1.9 |
“Fab Yield” |
2 |
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1.10 |
“Lot” |
2 |
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1.11 |
“Maximum Capacity” |
2 |
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1.12 |
“Move” |
2 |
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1.13 |
“MPD” |
2 |
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1.14 |
“Non-Specialty Wafers” |
2 |
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1.15 |
“Party” |
2 |
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1.16 |
“Pizza Mask Wafers” |
2 |
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1.17 |
“Photomasks” |
2 |
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1.18 |
“Planning Yield Assumption” |
2 |
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1.19 |
“Probe Services” |
3 |
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1.20 |
“Probe Yield” |
3 |
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1.21 |
“Process Failure” |
3 |
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1.22 |
“Production Wafers” |
3 |
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1.23 |
“Purchase Order” |
3 |
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1.24 |
“Purchase Order Release |
3 |
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1.25 |
“Quality Specifications” |
3 |
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1.26 |
“Risk Materials” |
3 |
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1.27 |
“Segment” |
3 |
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1.28 |
“Specialty Wafers” |
3 |
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1.29 |
“Specifications” |
3 |
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1.30 |
“Third-Party Requirement |
4 |
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1.31 |
“Uncommitted Available Capacity” |
4 |
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1.32 |
“Wafers” |
4 |
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1.33 |
“Wafer Credits” |
4 |
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1.34 |
“Wafer Volume Commitment” |
4 |
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1.35 |
“WOPD” |
4 |
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1.36 |
“WSPD” |
4 |
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2. |
PURCHASE AND SUPPLY OBLIGATIONS |
4 | |
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2.1 |
Conexant Purchase Obligations |
4 |
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2.2 |
Company Supply Obligations |
8 |
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3. |
WAFER PURCHASES |
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3.1 |
Scope |
9 |
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3.2 |
Forecasts |
10 |
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3.3 |
Purchase Orders; Purchase Order Releases; Specialty Wafers |
10 |
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3.4 |
Acceptance and Acknowledgement |
11 |
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3.5 |
Wafer Lots; Expedited Services |
11 |
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3.6 |
Pizza Mask Wafers |
12 |
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3.7 |
Cancellation and Modifications to Orders |
12 |
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3.8 |
Materials |
13 |
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3.9 |
Risk Materials |
13 |
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3.10 |
NRE Services |
13 |
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4. |
PROBE SERVICES AND RE-PROBE SERVICES |
14 | |
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4.1 |
Scope |
14 |
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4.2 |
Purchase Orders |
14 |
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4.3 |
Acknowledgement and Acceptance |
14 |
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4.4 |
Changes, Cancellation and Modifications to Orders |
14 |
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4.5 |
Removal of Test Equipment from the Fab |
15 |
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5. |
DELIVERY AND LOGISTICS |
15 | |
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5.1 |
Delivery |
15 |
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5.2 |
Storage |
16 |
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5.3 |
Transition Services Agreement |
16 |
ii
6. |
PRICING; CREDITS; AND PAYMENTS |
16 | |
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6.2 |
Wafer Credits |
16 |
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6.3 |
Costs |
17 |
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6.4 |
Taxes |
17 |
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7. |
TRACKING; REPORTING; AND AUDITS |
17 | |
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7.1 |
Wafer Tracking |
17 |
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7.2 |
Reporting Requirements |
17 |
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8. |
WARRANTY AND DISCLAIMER |
17 | |
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8.1 |
Wafer Warranty |
17 |
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8.2 |
Process Failure |
18 |
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8.3 |
Disclaimers |
18 |
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9. |
INDEMNIFICATION |
18 | |
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9.1 |
Conexant Indemnification Obligations |
18 |
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9.2 |
Company Indemnification Obligations |
18 |
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9.3 |
Conditions |
19 |
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9.4 |
Sole and Exclusive Remedy |
19 |
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10. |
CONFIDENTIALITY |
19 | |
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11. |
LIMITATIONS OF LIABILITY |
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11.1 |
Disclaimer |
19 |
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11.2 |
Basis of Bargain |
20 |
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12. |
TERM; TERMINATION |
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12.1 |
Term |
20 |
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12.2 |
Termination |
20 |
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12.3 |
Effect of Termination |
20 |
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13. |
GENERAL |
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13.1 |
Agency |
21 |
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13.2 |
Governing Law; Venue and Jurisdiction |
21 |
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13.3 |
Dispute Resolution |
21 |
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13.4 |
Injunctive Relief |
23 |
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13.5 |
Third-Party Beneficiaries |
23 |
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13.6 |
Compliance with Law |
23 |
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13.7 |
Force Majeure |
23 |
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13.8 |
Amendment; Later Agreement |
23 |
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13.9 |
Notices |
23 |
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13.10 |
Assignment |
24 |
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13.11 |
Waiver |
24 |
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13.12 |
Severability |
24 |
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13.13 |
Counterparts and Facsimile |
24 |
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13.14 |
Rules of Construction |
25 |
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13.15 |
Schedules and Exhibits |
25 |
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13.16 |
Entire Agreement |
25 |
iv
EXHIBIT A |
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PRICING | ||
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EXHIBIT B |
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WAFER VOLUME COMMITMENTS | ||
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SCHEDULE 1 |
FORECAST | ||
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SCHEDULE 2 |
WAFER MOVES TABLE | ||
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EXHIBIT C |
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RULES OF CHANGE, OPERATION, AND RELEASE PROCEDURES | ||
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EXHIBIT D |
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NEWPORT BEACH FAB CAPACITY | ||
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EXHIBIT E |
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WAFER CYCLE TIMES | ||
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EXHIBIT F |
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QUALITY SPECIFICATIONS | ||
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EXHIBIT G |
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REPORTS | ||
v
CONFIDENTIAL
WAFER SUPPLY AND SERVICES AGREEMENT
THIS WAFER SUPPLY AND SERVICES AGREEMENT (the “Supply Agreement”) is entered into as of March 30, 2002 (the “Effective Date”) by and between CONEXANT SYSTEMS, INC., a Delaware corporation (“Conexant”) and SPECIALTYSEMI, INC. a Delaware corporation (“Company”).
A. Conexant, Company, and Carlyle Capital Investors, L.L.C. have entered into a Contribution Agreement dated February 23, 2002 (the “Contribution Agreement”)pursuant to which Conexant contributed to Company the assets used to provide specialty process foundry services and to manufacture semiconductor wafers at a facility in Newport Beach, California (the “Newport Beach Fab”).
B. Conexant desires, on the terms and conditions of this Supply Agreement, to purchase from Company semiconductor wafers and related foundry, manufacturing, and probe services. Company is willing to supply such wafers and services to Conexant on the terms and conditions of this Supply Agreement.
1. DEFINITIONS. Capitalized terms not expressly defined elsewhere in this Supply Agreement have the following meanings:
1.1 “Affiliate” means any entity that at any time during the term of this Supply Agreement controls, is controlled by, or is under common control with a Party, where control means direct or indirect ownership of fifty percent (50%) or more of the outstanding voting stock or other equity interests ordinarily having voting rights.
1.2 “Basic Price” is defined in Exhibit A (Pricing).
1.3 “Capacity” means, as of any date for any period, the number of MPD capable of being completed at the Newport Beach Fab during such period, based on available equipment, tools, and personnel, without additional capital spending, equipment purchases, or hiring of personnel.
1.4 “Conexant Spin-off” means any entity that is a successor of any portion of the business of Conexant resulting from a spin-off, sale, or divestiture of such business, regardless of whether Conexant retains an equity or ownership interest in such entity. Without limiting the foregoing, the Parties agree and acknowledge that Mindspeed Technologies and Conexant’s wireless business (which is referred to within Conexant as “LeaderCo”) are, or upon the date of divestiture will be, Conexant Spin-offs.
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1.5 “Contract Price” is defined in Exhibit A (Pricing).
1.6 “Current Average Probe Yield means, for a particular type of Wafer, the Probe Yield established by averaging the Probe Yield for two hundred (200) Wafers of such type in each of the three previous Segments.
1.7 “Delivery Note” means the delivery instructions provided by Conexant to Company for Wafers ordered by Conexant.
1.8 “Engineering Wafers” means non-production Wafers manufactured by Company for qualification or testing and may include Pizza Mask Wafers.
1.9 “Fab Yield” means the percentage deviation between a particular number of Wafers for which fabrication is commenced at the Newport Beach Fab, and the number of such Wafers for which fabrication is successfully completed, irrespective of probe results.
1.11 “Maximum Capacity” means, as of any date for any period, the maximum number of MPD capable of being completed at the Newport Beach Fab during such period based on available equipment, tools, and personnel, without additional capital spending or equipment purchases. Maximum Capacity as of the Effective Date is reflected in Exhibit D (Newport Beach Fab Capacity).
1.12 “Move” means completion with respect to a single Lot of an individual stage in any of the processes required in fabricating Wafers at the Newport Beach Fab, as described in Exhibit B, Schedule 2.
1.13 “MPD” means Moves per day at the Newport Beach Fab.
1.14 “Non-Specialty Wafers” means all Wafers of all types other than Specialty Wafers.
1.15 “Party” means either Conexant or Company, as the context requires, and “Parties” means Conexant and Company collectively.
1.16 “Pizza Mask Wafers” means multiple device designs on a single Wafer.
1.17 “Photomasks” means precision photographic quartz or glass plates containing microscopic images of integrated circuits for use as master images to transfer circuit patterns onto semiconductor wafers during the fabrication of integrated circuits and other semiconductor products.
1.18 “Planning Yield Assumption” means, for any given type of Wafer, the expected percentage deviation between the number of Wafers specified for delivery in a Purchase Order and
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the total number of Wafers actually delivered, as set forth in Exhibit B, Schedule 2 as such exhibit may be updated from time to time upon written notice from Company.
1.19 “Probe Services” means electrical testing of individual semiconductor wafers on a substrate.
1.20 “Probe Yield” means the percentage deviation between a particular number of Wafers for which probing is conducted at the Newport Beach Fab, and the number of such Wafers that probe successfully.
1.21 “Process Failure” means a fault or flaw in the performance of any process within the fabrication operation that is not due to designs, specifications, Photomasks, or instructions provided by Conexant.
1.22 “Production Wafers” means Wafers manufactured by Company at the Newport Beach Fab after successful qualification and approval for mass production.
1.23 “Purchase Order” means a written blanket order for the purchase of a specified quantity of Wafers or Probe Services submitted by Conexant to Company.
1.24 “Purchase Order Release” means a written release issued by Conexant authorizing Company to commence processing of the Wafers under a Purchase Order.
1.25 “Quality Specifications” means the Wafer quality standards and criteria set forth in Exhibit F (Quality Specifications), as may they be modified by written agreement of the Parties from time to time.
1.26 “Risk Materials” means Wafers specifically identified by Conexant in a Purchase Order as “Risk Materials” that are to be manufactured by Company pursuant to Conexant’s Specifications, but for which compliance with the Quality Specifications is specifically waived. “Risk Materials” may include the following: unverified mask sets, unverified process changes, no supporting qualification data, and known design rule violations.
1.27 “Segment” means any one of the following two-calendar month periods: April-May, June-July, August-September, October-November, December-January, and February-March. Segments shall be numbered sequentially during the term of this Supply Agreement, commencing with Segment 1, which shall be the first full Segment following the Effective Date.
1.28 “Specialty Wafers” means Bipolar, Bi-CMOS, and SiGe Wafers.
1.29 “Specifications” means the technical specifications for the Wafers in effect at the Newport Beach Fab immediately prior to the Effective Date, as they may be modified from time to time by written agreement of the Parties, or if such technical specifications do not exist as of the Effective Date, then those technical specifications mutually agreed to in writing by the Parties for such Wafers, as they may be modified from time to time written agreement of the Parties.
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1.30 “Third-Party Requirement means any oral or written commitment from a customer (other than Conexant or a Conexant Spin-Off or a Conexant Affiliate) to engage Company to manufacture Wafers or provide related services for such customer at the Newport Beach Fab, which commitment is reasonably likely to result in a binding obligation.
1.31 “Uncommitted Available Capacity” means, at any given time, the Capacity remaining at the Newport Beach Fab after excluding all Capacity necessary to fulfill the Company’s commitments under this Supply Agreement and Third-Party Requirements.
1.32 “Wafers” means semiconductor wafers to be processed and prepared for shipping by Company at the Newport Beach Fab including Engineering Wafers, Production Wafers, Pizza Mask Wafers, and Risk Materials.
1.33 “Wafer Credits” is defined in Section 6.2 (Wafer Credits).
1.34 “Wafer Volume Commitment” is defined in Section 2.1(a) (Volume Commitments).
1.35 “WOPD” means a number of Wafers for which the fabrication process is completed at the Newport Beach Fab in a single day.
1.36 “WSPD” means a number of Wafers for which the fabrication process is commenced at the Newport Beach Fab in a single day.
2. PURCHASE AND SUPPLY OBLIGATIONS.
2.1 Conexant Purchase Obligations.
(a) Volume Commitments. Subject to the terms and conditions of this Supply Agreement and in accordance with the procedures set forth in Section 3.3 (Purchase Orders; Purchase Order Releases; Specialty Wafers), Conexant will submit Purchase Orders to Company for the manufacture of, and will purchase pursuant to such Purchase Orders, Wafers in volumes sufficient to meet the minimum MPD purchase commitments set forth in Exhibit B, Schedule 1 (the “Wafer Volume Commitments”), at the prices set forth below.
(b) Segments 1 Through 6. During Segments 1 through 6:
(i) Conexant shall meet the Wafer Volume Commitment corresponding to the current Period set forth in Exhibit B, Schedule 1.
(ii) For any of Segments 1 through 6 in which the number of Wafers purchased by Conexant at the end of the Segment is less than the greater of (i) the Wafers ordered in the Purchase Order for such Segment described in Section 3.3(a) and (ii) the Wafer Volume Commitment for such Segment, in addition to the amounts paid for Wafers purchased, Conexant shall pay the following in respect of the shortfall in the Wafers purchased compared to the greater of (i) the Wafers ordered in the Purchase Order for such Segment described in Section 3.3(a) and (ii) the Wafer Volume Commitment (the “Shortfall”):
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(1) […***…] of the Contract Price for the Shortfall up to the difference between the Wafer Volume Commitment and the Wafers ordered in the Purchase Order described in Section 3.3(a) (unless the number of Wafers ordered in the Purchase Order described in Section 3.3(a) equals or exceeds the Wafer Volume Commitment, in which case this portion will be equal to […***…]); plus
(2) […***…] of the Contract Price for the portion of the Shortfall not covered in Section 2.1(b)(ii)(1) above (if any), up to the lesser of (i) the difference between (A) the number of Wafers purchased in the Working Segment and (B) the Wafer Volume Commitment (unless the number of Wafers purchased exceeds the Wafer Volume Commitment, in which case this amount will be equal to […***…]); and (ii) the difference between the Wafers covered in Section 2.1(b)(ii)(1) and […***…] of the Wafer Volume Commitment; plus
(3) […***…] of the Contract Price for the portion of the Shortfall not covered in Section 2.1(b)(ii)(1) or in Section 2.1(b)(ii)(2) above (if any).
Example 1. The Wafer Volume Commitment is […***…] WSPD. Thirty days prior to the beginning of the Working Segment, Conexant orders the Wafer equivalent of […***…] WSPD for the Working Segment. At the end of the Segment, Conexant purchases the Wafer equivalent of […***…] WSPD. The Shortfall is the Wafer equivalent of […***…] WSPD. Conexant pays […***…] on a Wafer equivalent of […***…] WSPD, […***…] on a Wafer equivalent of […***…] WSPD, and […***…] on a Wafer equivalent of […***…] WSPD.
Example 2. The Wafer Volume Commitment is […***…] WSPD. Thirty days prior to the beginning of the Working Segment, Conexant orders the Wafer equivalent of […***…] WSPD for the Working Segment. At the end of the Segment, Conexant purchases the Wafer equivalent of […***…] WSPD. The Shortfall is the Wafer equivalent of […***…] WSPD. Conexant pays […***…] on a Wafer equivalent of […***…] WSPD, and […***…] on the Wafer equivalent of […***…] WSPD.
(iii) If, in any of Segments 1 through 6, Conexant fails to meet the Wafer Volume Commitment or to purchase Wafers ordered in the Purchase Order for such Segment described in Section 3.3(a), and as a result pays any amounts pursuant to Section 2.1(b)(ii), and, prior to the end of Segment 6, purchases Wafers in excess of the Wafer Volume Commitment for the Working Segment, then Conexant shall be required to pay only […***…] of the Contract Price for all Wafers purchased in such Working Segment in excess of the Wafer Volume Commitment, until the total number purchased up to that time equals the greater of (A) the average of the total Wafer Volume Commitment for Segments 1 through 6, pro-rated to the time in question; or (B) the average of the total Wafers ordered in Purchase Orders pursuant to Section 3.3(a) during Segments 1 through 6 for which Conexant paid amounts pursuant to Section 2.1(b)(ii), pro-rated to the time in question. Conexant will pay the Contract Price, Basic Price, or other price specified in this Supply Agreement, as appropriate, for any additional Wafers purchased in the Working Segment thereafter.
(c) Segments 7 Through 18. During Segments 7 through 18:
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(i) Conexant shall meet the Wafer Volume Commitment for such period set forth in Exhibit B, Schedule 1.
(ii) In the event that the number of Wafers purchased under the Purchase Order(s) for any Working Segment is less than the greater of (i) the Wafers ordered in the Purchase Order for such Segment described in Section 3.3(a) and (ii) the Wafer Volume Commitment for the Working Segment, Conexant shall pay to Company, in addition to the Contract Price for the Wafers actually purchased, an amount equal to one hundred percent (100%) of the total Contract Price for the Shortfall for such Segment.
(d) Requirements in Excess of the Wafer Volume Commitment.
(i) Non-Specialty Wafers. During Segments 1 through 24, except to the extent that it has any preexisting obligations as of the Effective Date to purchase Non-Specialty Wafers from third parties, (and, only during Segments 18 through 24, upon the additional condition that Company is competitive on cost, service, yield and technology for those Non-Specialty Wafers), Conexant shall submit all requirements for Non-Specialty Wafers that are in excess of the Wafer Volume Commitment to Company, which, provided that it has sufficient Uncommitted Available Capacity, shall be obligated to produce such Wafers, and Conexant shall be obligated to purchase such Wafers at the Contract Price, except during Segments 13 through 24. During Segment 13 and the first month of Segment 14 (“Quarter 9”), Conexant will purchase such Wafers at a price equal to the sum of the Contract Price and […***…] of the difference between the Contract Price and the Basic Price. During the second month of Segment 14 and Segment 15 (“Quarter 10”), Conexant will purchase such Wafers at a price equal to the sum of the Contract Price and […***…] of the difference between the Contract Price and the Basic Price. During Segment 16 and the first month of Segment 17 (“Quarter 11”), Conexant will purchase such Wafers at a price equal to the sum of the Contract Price and […***…] of the difference between the Contract Price and the Basic Price (in each of Quarters 9, 10, and 11, the prices described for each respective Quarter shall be referred to as the “Stepped Price”). During Segments 18 through 24, Conexant will purchase such Wafers at the Basic Price.
(ii) Specialty Wafers. During Segments 1 through 12, Conexant may submit its requirements for Specialty Wafers in excess of the Wafer Volume Commitment to Company, which, provided that it has sufficient Uncommitted Available Capacity, shall be obligated to produce such Wafers. Conexant shall purchase such Wafers at the Contract Price.
(e) Surge Capacity. At any time after Conexant’s submission of a Purchase Order for any Working Segment, Conexant may request to increase the number of Wafers to be purchased in such Working Segment (an “Increase Notice”).
(i) Segments 1 through 18. During Segments 1 through 18, the following terms will apply:
(1) Commitment Surge. If Conexant submits an Increase Notice with at least […***…] advance notice for additional Wafers in order to meet a Wafer Volume Commitment (“Commitment Surge Wafers”), Company will fabricate and sell to Conexant a number of Commitment Surge Wafers equal to the lesser of (A) […***…]; or (B) the
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equivalent of no more than […***…] WSPD. Company will use commercially reasonable efforts to deliver the Commitment Surge Wafers as soon as possible. Conexant will pay the […***…] for all Commitment Surge Wafers.
(2) Beyond Commitment Surge. If Conexant submits an Increase Notice with at least […***…] advance notice for additional Wafers that either (A) are […***…]; or (B) represent the equivalent of more than […***…] WSPD (“Additional Wafers”), Company will use commercially reasonable efforts to fabricate and sell to Conexant the number of Additional Wafers ordered by Conexant. Conexant will pay […***…] for all Additional Wafers.
(ii) After Segment 18. After Segment 18, at any time after Conexant’s submission of a Purchase Order for any Working Segment, Conexant may submit an Increase Notice to Company. If Company has Uncommitted Available Capacity, Company will fabricate and sell to Conexant such additional Wafers, or as many as can be fabricated in light of the Uncommitted Available Capacity. Conexant will pay […***…] for all such additional Wafers purchased after Segment 18.
(f) Purchases for Certain Entities. Company agrees that Conexant, as agent, may place orders for any Conexant Spin-Off or Conexant Affiliate, under the same terms and conditions for Wafers established under this Supply Agreement. The Parties acknowledge and agree that at any time after a Conexant Spin-off commences operations as a separate legal entity, (i) Conexant may partition the Wafer Volume Commitments between Conexant and Conexant Spin-offs, assuring that the total volume meets the total Wafer Volume Commitment; (ii) Conexant and Conexant Spin-offs may partition Wafer Credits between them, provided, however, that the total number of Wafer Credits held by Conexant and all Conexant Spin-offs will not exceed the original number of Wafer Credits; and (iii) each Conexant Spin-off (a “Participating Spin-off”) may enter into a separate agreement with Company containing all of the terms and conditions of this Supply Agreement, in which case the Participating Spin-off will order Wafers directly from Company. Company will have the right to review the allocation of Wafer Volume Commitments, Wafer Credits, and other rights hereunder partitioned and assigned to each Participating Spin-off, and Conexant will work in good faith with Company to resolve any reasonable objections that the Company may have to such allocation. If Conexant and Participating Spin-offs partition Wafer Volume Commitments as set forth above, the determination of whether the Wafer Volume Commitment is met will be determined on a collective basis, and no additional payments to meet the Wafer Volume Commitment will be due to Company if the total number of Wafers purchased by Conexant and Participating Spin-offs is sufficient to meet or exceed the applicable Wafer Volume Commitment. Conexant will remain responsible to Company for satisfaction of Wafer purchase and payment obligations hereunder, regardless of whether it is Conexant itself or a Participating Spin-off that fails to satisfy any such obligations. In the event that a third party acquires any Participating Spin-off, its business, or all or substantially all of its assets, then such third party may only assume the rights of Participating Spin-offs hereunder with respect to Wafer types of such Participating Spin-off that have been manufactured or are under development by the Newport Beach Fab at the time of such acquisition.
(g) Cooperation. Conexant shall cooperate with Company in furtherance of the purposes hereof by timely furnishing all design information, Photomasks, specifications,
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intellectual property, and other items and information needed to fabricate the Wafers ordered by Conexant, and by providing reasonable technical advice and assistance in such efforts.
(h) Payment; Remedy. All determinations of whether Wafer Volume Commitments have been met during any Working Segment shall be determined at the end of such Working Segment, and all amounts to be paid in respect of portions of the Wafer Volume Commitment not purchased in accordance with this Section will be tracked monthly, and reconciled and paid at the end of each Working Segment. Conexant’s payment of the foregoing amounts shall be Company’s sole and exclusive remedy, and Conexant’s entire liability, for Conexant’s failure to meet any Wafer Volume Commitment hereunder or to purchase any Wafers ordered in Purchase Orders pursuant to Section 3.3(a) during Segments 1 through 18.
2.2 Company Supply Obligations.
(a) Commitment; Requests for Increased Capacity. Company shall be able to provide the Capacity to satisfy the Wafer Volume Commitments set forth in Exhibit B, Schedule 1 during each Segment of the term of this Supply Agreement, and will accept and fulfill all Purchase Orders that are submitted pursuant to the […***…] Purchase Order requirements set forth in Section 3.3 (Purchase Orders; Purchase Order Releases; Specialty Wafers) up to the applicable Wafer Volume Commitments. In addition, upon Conexant’s request, Company will increase (and maintain for a period of time specified by Conexant) Capacity up to the Maximum Capacity of the Newport Beach Fab, provided that (i) Company will have no less than three (3) Segments in which to accomplish such increase; (ii) in no event will Company be required to increase Capacity by an increment equivalent to more than fifty (50) WSPD for any three (3) Segment period; and (iii) at the time of its request, Conexant submits binding Purchase Orders for a total number of Wafers sufficient to utilize the requested increase in Capacity for the period of the desired increase.
(b) Notice Requirements. If at any time Company believes or becomes aware that it would be unable to satisfy the Wafer requirements of Conexant contained in the latest Order Forecast, then Company will promptly notify Conexant in writing.
(c) Wafer Processes. This Supply Agreement applies to all processes currently available or in development at the Newport Beach Fab. Future processes that are developed by the Company may be added to this Supply Agreement by mutual consent. Subject to the restrictions in this Section 2.2(c), Company may terminate the use of a Wafer process at the Newport Beach Fab. At least […***…] prior to the date of the discontinuance of any process with respect to any Wafers, Company shall provide Conexant with written notice of its intent to terminate such Wafer process and shall cooperate with Conexant on a transition plan with respect to Conexant’s supply of Wafers. If the projected or actual volume on any process decreases to less than the equivalent of […***…] WSPD over […***…] consecutive Segments, Company may phase out such process without such […***…] notice, provided that Conexant and Company will in such case cooperate to phase out such process in a timely manner through an end-of-life buy. Company will perform the transition in accordance with the plan and will use commercially reasonable efforts to ensure a smooth transition.
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(d) Closing of Newport Beach Fab. Company shall notify Conexant at least […***…] prior to the date that Company intends to commence any closure, in whole or in part, of the Newport Beach Fab. Company shall prepare and obtain Conexant’s written approval on a transition plan to transfer the Wafer processing technologies requested by Conexant to a foundry or foundries designated by Conexant and specifically designed to ensure that there is no interruption in Conexant’s supply of Wafers. The time to prepare and approve the transition plan will be completed in parallel with the […***…] notification period. Both Parties will use commercially reasonable efforts to (i) transfer the Wafer processing technology in accordance with the Conexant-approved plan and (ii) ensure a smooth transition of Wafer processing including making available Company engineers to assist the designated foundry or foundries in implementing and qualifying the Wafer processing technology and to promptly respond to inquiries regarding the use of such processes or technology. Conexant shall reimburse Company for the actual out-of-pocket expenses incurred by Company, and pre-approved by Conexant, in transitioning such technology to the designated foundry or foundries. Conexant will have the right, until such time as the designated foundry or foundries is operational and qualified to process the Wafers, to continue to submit Purchase Orders for Wafers to Company. Company will continue to manufacture, supply, and provide to Conexant, in accordance with the Wafer purchase procedures in Section 3 (Wafer Purchases), any such Wafers that are ordered. The foregoing obligations are in addition to Company’s other obligations under this Supply Agreement.
(e) Supply Interruptions. If at any time Company experiences a Material Interruption (as defined below), Conexant’s Wafer Volume Commitments shall be reduced by the number of Wafers Company is unable to supply for the actual duration of such Material Interruption, provided, however, that if such Material Interruption results from Conexant’s failure to provide any services that Conexant is obligated to provide under the Information Technology Service Agreement of even date herewith by and between Company and Conexant, then Conexant’s Wafer Volume Commitment shall not be reduced as a result of such Material Interruption. If an unintended interruption in Company’s ability to fulfill its supply obligations occurs that is not a Material Interruption, Conexant shall remain obligated to satisfy its obligations hereunder to purchase Wafers, provided, that if, due to such interruption, Company is unable to deliver a number of Wafers ordered to fulfill a portion of a Wafer Volume Commitment prior to the end of the Segment, then Conexant will be excused from that portion of the Wafer Volume Commitment for that Segment, and such portion will be rolled over to be fulfilled by the end of the following Segment. This provision shall not limit any other rights or remedies Conexant or Company may have for a breach of this Supply Agreement or otherwise, and nothing in this provision is intended to supersede, restrict, or otherwise limit either party’s rights under Section 13.7 (Force Majeure). For purposes of this Section, “Material Interruption” means an unintended interruption in Company’s ability to produce Wafers that (i) endures for more than a period of […***…], and (ii) causes a reduction in Capacity of […***…] or more WSPD.
3. WAFER PURCHASES.
3.1 Scope. Upon receipt of an applicable Purchase Order Release (as described in Section 3.3(b) (Purchase Order Releases) below), Company shall produce Wafers and provide Probe Services for Conexant. Wafers may include Production Wafers, Engineering Wafers, and Risk Materials from any semiconductor wafer process in production, or released to production, at the Newport Beach Fab on or after the Effective Date. For new Wafers or processes requested by
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Conexant, Conexant will provide Company with the documentation substantially similar to the document(s) set forth in Exhibit C (Rules of Change, Operation and Release Procedures), as applicable to the requested process. Both Parties agree to cooperate to provide all necessary information as described in Exhibit C.
3.2 Forecasts. On or about the last day of each calendar month during the term of this Supply Agreement, Conexant will provide to Company a rolling forecast, covering a minimum period of […***…], of Conexant’s expected order volumes for Wafers in the coming […***…] (the “Order Forecast”). The Order Forecasts are for planning purposes only and will not bind Conexant or the Company in any respect. No deviation of actual volumes from the forecasted volumes will relieve Conexant or Company of their respective responsibilities and obligations under this Supply Agreement or affect the pricing established under this Supply Agreement. Subject to the requirements of Section 2.1 (Conexant Purchase Obligations), Conexant may change or update the forecasts delivered hereunder at any time upon notice to Company.
3.3 Purchase Orders; Purchase Order Releases; Specialty Wafers.
(a) Purchase Order. Not later than […***…] prior to the first business day of each Segment during the term of this Supply Agreement (other than Segment 1), Conexant shall submit to Company a written Purchase Order setting forth the specific volume and mix of Wafers […***…] it intends to purchase under this Supply Agreement during the following Segment (the “Working Segment”), expressed as total WSPD per type of Wafer. Conexant shall not load the Newport Beach Fab by a number of WSPD in each day of the Working Segment set forth in such Purchase Order that deviates by more than plus or minus […***…] WSPD from the average number of WSPD per day for the entire Working Segment, as determined by dividing the total number of WSPD for the entire Working Segment set forth in such Purchase Order by sixty and two-thirds (60 2/3) days. The Purchase Order for Segment 1 will be submitted to Company within three (3) business days after the Effective Date.
(b) Purchase Order Releases Conexant will submit […***…] Purchase Order Releases against outstanding Purchase Orders, to be submitted by close of business on […***…] for Wafers to be released […***…] Each Purchase Order Release for Wafers will specify the applicable Purchase Order, Wafer part number and revision level, quantity, additional component parts required by Conexant, price, delivery date, ship-to address, and other applicable information as determined by Conexant. Purchase Order Releases shall not deviate from the volumes and mixes specified for the corresponding period of time in the applicable Purchase Order, except that Conexant may (i) modify the volume of Wafers by no more than plus or minus […***…] WSPD from the specified volume for the applicable period of time in the applicable Purchase Order; and (ii) […***…], subject to available Capacity at the Newport Beach Fab. Notwithstanding the receipt of a Purchase Order, Company will not commence manufacturing of the Wafers under a Purchase Order until Conexant has issued a Purchase Order Release.
(c) Reserved SiGe Wafers. If, at any time Company receives a written order (a “SiGe Order”) from a third party customer for the purchase of SiGe Wafers, and Company lacks sufficient Capacity to fill the SiGe Order because it is obligated to reserve such Capacity for SiGe Wafers that have been ordered but not yet released by Conexant pursuant to Section 3.3(b) (Purchase Order Releases) above (the “Reserved SiGe Wafers”), Company may notify Conexant
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of the SiGe Order and require Conexant to confirm that it will issue a Purchase Order Release for such Reserved SiGe Wafers.
(i) If Conexant confirms that it will issue a Purchase Order Release for the Reserved SiGe Wafers and later does so, then Company will fill the Purchase Order Release for the Reserved SiGe Wafers […***…].
(ii) If Conexant confirms that it will issue a Purchase Order Release for the Reserved SiGe Wafers and later fails to do so, then Conexant will pay to Company an amount equal to […***…], up to the number of SiGe Wafers made unavailable due to Conexant’s failure to cancel the unreleased Reserved SiGe Wafers.
(iii) If Conexant agrees to cancel the Reserved SiGe Wafers, then (A) Company will be relieved of any further obligation to hold the Capacity for the Reserved SiGe Wafers or deliver the Reserved SiGe Wafers to Conexant; and (B) Company may utilize the previously reserved Capacity to fill the SiGe Order.
3.4 Acceptance and Acknowledgement All Purchase Orders submitted at least […***…] prior to the start of the Working Segment for Wafers shall be accepted by Company up to the Wafer Volume Commitment and as specified in Section 2.1(d) (Requirements in Excess of the Wafer Volume Commitment), and may be accepted by Company in all other cases. Subject to the terms of this Supply Agreement, once Company accepts a Purchase Order, it will be obligated to produce and deliver the Wafers in the volumes specified in the Purchase Order (subject to the applicable Planning Yield Assumption), and Conexant will be obligated to purchase such Wafers in the volumes specified in the Purchase Order. Within […***…] after receipt of each Purchase Order or Purchase Order Release or, if received on a non-business day or on the day prior to a non-business day, within […***…], Company will acknowledge such Purchase Order or Purchase Order Release in writing by either fax or e-mail notice to Conexant’s purchasing agent identified on the face of the Purchase Order or Purchase Order Release. Such acknowledgement will include Company’s projected delivery date for the order; provided that, in establishing such delivery date, Company shall use reasonable efforts to comply with the delivery dates specified in Conexant’s Purchase Order Release. The Wafer process cycle times set forth in Exhibit E (Wafer Cycle Times) shall be updated each Segment. If at any time during the production of such Wafers Company believes or becomes aware that the delivery may be delayed by more than […***…], Company shall provide Conexant with written notice of such change in the delivery schedule and the quantity of Wafers affected. Such report shall be referred to as an “Exception Report” and any Wafer Lots not specifically identified in an Exception Report shall be delivered by Company no later than the delivery date specified in the Purchase Order Release. Purchase Orders or Purchase Order Releases not acknowledged or rejected by Company within such time will be deemed accepted by Company.
3.5 Wafer Lots; Expedited Services. Unless otherwise agreed to in writing by the Parties, Production Wafers shall be ordered by Conexant and delivered by Company in Lots of twenty-five (25) Wafers (subject to the applicable Planning Yield Assumptions) and Engineering Wafers shall be ordered by Conexant and delivered by Company in Lots of five (5) to twenty-five (25) Wafers (subject to the applicable Planning Yield Assumptions). At Conexant’s request, Company will use commercially reasonable efforts to process Production Wafer Lots, Engineering
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Wafer Lots, and Risk Materials on an expedited basis; provided that Company shall have no liability for failure to actually provide priority processing. Company shall provide up to the Allowable Number (as defined below) of priority Lots to be processed at any one time […***…], and if the number of expedited Lots requested by Conexant and provided on an expedited basis by Company exceeds the Allowable Number of Lots in process at any given time, the cost of Wafers in excess of the Allowable Number shall be:
P1 Lots |
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[...***...] multiplied by the Contract Price or Basic Price (or other applicable price) |
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HVL Lots |
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[...***...] multiplied by the Contract Price or Basic Price (or other applicable price) |
The “Allowable Number” shall be determined as follows: in Segments 1-6, the Allowable Number of expedited Lots shall be […***…] ([…***…] of which may be HVL), in Segments 7-12, the Allowable Number shall be […***…] ([…***…] of which may be HVL), and in Segments 13-18, the Allowable Number shall be […***…] ([…***…] of which may be HVL); provided, that, for every […***…] WSPD contained in any Purchase Order in excess of the Wafer Volume Commitment for any Working Segment, the Allowable Number shall be increased by […***…] for that Segment.
3.6 Pizza Mask Wafers. Conexant may submit Purchase Orders and Purchase Order Releases for Pizza Mask Wafers, and Company shall fulfill such orders to the extent required to fill such orders under Section 2.2 (Company Supply Obligations), provided that (i) the only testing of Pizza Mask Wafers required to be performed by Company will be parametric testing; and (ii) Company will deliver Pizza Mask Wafers in wafer form. The price of the Pizza Mask Wafer will be […***…].
3.7 Cancellation and Modifications to Orders. Conexant may modify or reschedule a Purchase Order Release (in whole or in part) as set forth in this Section 3.7; provided that Conexant meets its Wafer Volume Commitments.
(a) Cancellation Before Process Start Except as set forth in Section 3.3(b) (Purchase Order Releases), for each Purchase Order Release for which processing of the Wafers has not yet begun, Conexant may cancel or modify a Purchase Order Release (in whole or in part) […***…] by delivering to Company a written notice of cancellation or modification, provided that Conexant replaces within a reasonable time any Moves reduced or eliminated through such cancellation or modification with the same number of Moves with respect to replacement products.
(b) Rescheduling. For each Purchase Order Release, Conexant may reschedule delivery […***…] by delivering to Company a written notice rescheduling such delivery; provided that Conexant shall be responsible for payment for all completed Wafers in accordance with the original delivery schedule, and that such delays shall be subject to Section 5.2 (Storage) regarding storage of completed Wafers.
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(c) Cancellation After Process Start If Conexant cancels a Purchase Order Release (in whole or in part) after the date the processing of such Wafers has been started, then either, (i) if so instructed by Conexant, Company will not complete the cancelled Wafers and will deliver the incomplete Wafers to a location designated by Conexant, in which case the Wafers will not count against the Wafer Volume Commitment, and Conexant will pay the Pro-Rated Price, as defined below; or (ii) unless otherwise instructed pursuant to clause (i) of this Section, complete the cancelled Wafers and hold the resulting Wafers in finished goods inventory where they will be stored in accordance with Section 5.2 (Storage), in which case the Wafers will count against the Wafer Volume Commitment and Conexant will pay the applicable Price for completed Wafers. The “Pro-Rated Price” means the greater of (A) […***…] percent ([…***…] %) of the price that would have been paid for the completed Wafers (either the Contract Price, the Basic Price, or other applicable price, as the case may be) and (B) such applicable price for completed Wafers multiplied by the ratio obtained by dividing (i) the number of Moves completed with respect to the Lots for which the Purchase Order Release is cancelled as of the time the cancellation notice is received by Company by (ii) the total number of Moves that would have been required to process the Lots in question.
(d) Rework Requests If for any reason other than a Process Failure it becomes necessary to, or Conexant otherwise requests Company to, modify any part of the fabrication process with respect to Wafers for which a Purchase Order has already been accepted or for which the fabrication process has already started, Company may agree to such changes if technically feasible and if Company has available Capacity, in which case Conexant will be obligated to pay the applicable price for rework services set forth in Exhibit A (Pricing). In the event that Company does not accept such changes, then Conexant may cancel the Purchase Order Release in question, subject to this Section 3.7.
3.8 Materials. Company shall be responsible for procuring all materials required to manufacture the quantity of Wafers ordered by Conexant. Conexant shall be responsible for obtaining and furnishing to Company all Photomasks, or any other products with similar functional characteristics, required to manufacture or support the Wafers ordered by Conexant. Company shall be responsible for repair or replacement of any of Conexant’s Photomasks damaged while in Company’s possession.
3.9 Risk Materials. At Conexant’s request and subject to Section 2.1 (Conexant Purchase Obligations) and to an applicable Purchase Order, Company shall process and provide Risk Materials to Conexant. With all Purchase Orders for Risk Materials, Conexant shall provide a written statement setting forth the risk factors or any special circumstances related to the Risk Materials and specifying the quantity of Risk Materials to be provided. Company’s acknowledgement of a Purchase Order for Risk Materials shall be deemed an acknowledgement of such risks or circumstances.
3.10 NRE Services At Conexant’s request, Company shall negotiate to provide non-recurring engineering services for new Wafers, provided that the Parties reach agreement concerning the terms and conditions of provision of such services. The Parties shall negotiate in good faith the terms and conditions and any applicable costs associated with such engineering services.
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4. PROBE SERVICES AND RE-PROBE SERVICES.
4.1 Scope. Company shall provide Probe Services for all Wafers produced for Conexant by the Company that are included in the Wafer Volume Commitment, at no additional charge. For other Wafers provided by Company, the Parties will agree upon whether the Basic Price will include Probe Services. Company may also provide Probe Services for Wafers from other sources provided by Conexant, subject to agreement by the Parties on terms and conditions for such Probe Services. Probe Services to be provided under this Supply Agreement shall be limited to Probe Services in conjunction with Wafer production, and do not include Engineering Probe or Probe Card Services, which are subject to the separate Transition Services Agreement between the Parties. Probe Services may be provided using testers owned by Company or Conexant, as specified by Conexant in the applicable Purchase Order. Conexant will provide all of the documentation and test parameters necessary to complete Probe Services prior to issuing a Purchase Order Release.
4.2 Purchase Orders. Subject to the agreement of the Parties on the terms for Probe Services (other than for Wafers produced by Company), Conexant will submit blanket Purchase Orders to Company for Conexant’s expected requirements for Probe Services. Conexant will then submit […***…] Purchase Order Releases to such Purchase Orders. Notwithstanding the receipt of a Purchase Order, Company will not commence performance of Probe Services under a Purchase Order until Conexant has issued a Purchase Order Release. Each Purchase Order Release for Probe Services will specify the applicable Purchase Order, applicable wafers provided by Conexant, testers to be used, price, delivery date, ship-to address, and other applicable information as determined by Conexant.
4.3 Acknowledgement and Acceptance. Within […***…] after receipt of each Purchase Order or Purchase Order Release or, if received on a non-business day or on the day prior to a non-business day, within […***…], Company will acknowledge such Purchase Order or Purchase Order Release in writing by either fax or e-mail notice to Conexant’s purchasing agent identified on the face of the Purchase Order or Purchase Order Release. Purchase Orders or Purchase Order Releases not acknowledged or rejected by Company within such time will be deemed accepted by Company.
4.4 Changes, Cancellation and Modifications to Orders.
(a) Changes. Conexant may submit documentation changes for Probe Services at any time. In the event such change requires a substantial change in the scope of work, Company shall promptly notify Conexant in writing as to whether Company accepts such change, and, if accepted, of the impact of the change on cost and delivery prior to implementing the change. Upon receipt of Conexant’s written approval of the change, Company shall adjust the price and delivery for the Probe Services to be performed and implement the requested change
(b) Cancellations. For each Purchase Order Release for which Probe Services has not yet been started, Conexant may cancel or modify a Purchase Order Release (in whole or in part) […***…] by delivering to Company a written notice of cancellation or modifications.
(c) Rescheduling. For each Purchase Order Release, Conexant may reschedule the Probe Services […***…] by delivering to Company a written notice rescheduling
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such Probe Services, which schedule change shall be subject to Company’s approval depending on Capacity and available resources
(d) Holds and Cancellations After Process Start. Conexant may put on hold any Probe Services to be provided under a Purchase Order Release for up to […***…] Lots at a time; provided that no Lot will remain on hold for longer than […***…], after which the Probe Services shall be deemed cancelled and Company shall, as Company’s sole remedy, invoice Conexant for the Probe Services actually performed by Company prior to date of the hold. If Conexant cancels a Purchase Order Release (in whole or in part) after the date the Probe Services have been started, then Company will either, at Conexant’s sole discretion (i) not complete the cancelled Probe Services and hold the wafers in a processing location designated by Conexant; or (ii) complete the cancelled Probe Services. As Conexant’s sole liability, and Company’s sole remedy, for such cancellation, Conexant will pay to Company an amount equal to the price for the Probe Services actually performed by Company prior to the date of cancellation.
(e) Excess Service Requirements. If Conexant’s demand exceeds the Company’s Probe Services capacity in Newport Beach, Conexant shall offer any available Probe Services capacity to Company at a Conexant facility and assure this capacity is offered at the same cost or less then the cost that would have been incurred by Company had the Probe Services been performed at the Company.
4.5 Removal of Test Equipment from the Fab. The Parties acknowledge that certain probe and test equipment owned by Conexant is located in the Newport Beach Fab, and that Company is entitled to use and access such equipment pursuant to the Transition Services Agreement between Conexant and Company, dated March 12, 2002. Conexant may not remove any of the test equipment from the Probe floor during the first three (3) year period during the term of this Supply Agreement. At any time following the third anniversary of this Supply Agreement, Conexant may deliver a written notice of removal to Company with respect to any test device owned by it, and may remove such test device after six (6) months following receipt by Company of such notice. Notwithstanding the foregoing, at any time following the first anniversary of this Supply Agreement, Conexant may deliver a written notice of removal to Company with respect to the HP 84000 equipment owned by it, and may remove such HP 84000 equipment after three (3) months following receipt by Company of such notice.
5. DELIVERY AND LOGISTICS.
5.1 Delivery. All Wafers delivered to Conexant shall be delivered F.O.B. the Company’s facility at the Newport Beach Fab, as requested in the applicable Delivery Note. Title and risk of loss shall pass from Company to Conexant upon delivery, which shall be deemed made upon transfer of possession to the shipping carrier or to storage if not shipped immediately. Conexant shall be responsible for all freight, handling and insurance charges subsequent to such delivery. Except in accordance with the applicable delivery terms set forth in this Supply Agreement, Company shall not have any liability in connection with shipment, nor shall the shipping carrier be deemed to be an agent of Company.
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5.2 Storage. Following delivery to Conexant, Company shall provide storage of up to […***…] Lots of completed Wafers […***…], provided that no Lot shall remain in such storage for longer than […***…].
5.3 Transition Services Agreement Shipping and handling of finished Wafers will be in accordance with the applicable provisions of the Transition Services Agreement between Conexant and Company, dated March 12, 2002.
6. PRICING; CREDITS; AND PAYMENTS.
(a) Wafers. Company will invoice Conexant for all Wafers upon completion of production of each Lot, at the applicable Wafer price calculated pursuant to Exhibit A (Pricing) in effect on the date of the invoice, less any applicable Wafer Credits (as defined in Section 6.2 (Wafer Credits) below). For Lots of Engineering Wafers, Company will invoice Conexant at the end of each month for all Moves completed with respect to such Engineering Wafers during such month, and upon completion of production for Engineering Wafers for any completed Moves not previously invoiced. Each invoice submitted to Company shall specifically set forth the Wafer Credits, if any, applied to such invoice. In Segments 1 through 6, Conexant shall pay any amounts due on such invoices within […***…] of the receipt of the invoice and in all subsequent Segments such payments shall be made within […***…] of receipt of the invoice. Notwithstanding any other provision hereof, neither Party may offset any amounts owed by such Party to the other Party against any amounts from such other Party, without such other Party’s express written agreement to such offset in each case.
(b) Probe Services and Re-probe Services. Company will invoice Conexant for Probe Services and any other services specified in this Supply Agreement on a monthly basis. Pricing for such services shall be in accordance with Exhibit A (Pricing). All invoice costs include, without limitation, the labor for services actually performed, materials, material burden, and costs associated with any changes approved in writing by Conexant
6.2 Wafer Credits. Company will provide to Conexant credits for the purchase of Wafers from Company in the amount of […***…] U.S. Dollars (U.S. $[…***…]) to be used in Segments 13 through 30 (the “Wafer Credits”). No more than […***…] U.S. Dollars (U.S. $[…***…]) total in Wafer Credits may be used within any consecutive six-Segment period. Such Wafer Credits shall apply only to Wafers purchased by Conexant at the Basic Price (or, during Quarters 9 through 11, at the Stepped Price). The amount of the Wafer Credit applied to each such Wafer shall not exceed […***…] U.S. Dollars (U.S. $[…***…]) or the difference between the Contract Price and the Basic Price, whichever is less. Conexant may, at its discretion and at any time upon written notice to Company, allocate any existing Wafer Credits between Conexant and any of the Conexant Spin-offs, provided that any Wafer Credits so allocated shall remain subject to the provisions hereof. Upon expiration of this Supply Agreement, if Conexant has any unused Wafer Credits remaining, Conexant will be permitted to apply such unused Wafer Credits against any purchase of Wafers from Company during the two (2) year period immediately following the date of termination; provided, however, that the amount of the Wafer Credit applied to any one Wafer shall not exceed […***…] U.S. Dollars (U.S. $[…***…]) and the total amount of Wafer Credits may not exceed […***…] U.S. Dollars (U.S. $[…***…]) in the aggregate in such two year period. During the time that Conexant has unused Wafer Credits available, Conexant may make a
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guaranteed commitment (a “Guaranteed Commitment”) to Company for the following quantities of Wafers: (a) during Segments 13 through 18 (“Year 3”), a number of Wafers equal to no more than the equivalent of […***…] ([…***…]) MPD during Year 3; and (b) thereafter, a number of Wafers equal to no more than the equivalent of […***…] ([…***…]) MPD during each year. Provided that the Guaranteed Commitment is made no later than six (6) months in advance and covers the purchase of Wafers over a six (6) month period, Company will accept and fulfill all Purchase Orders issued against the Guaranteed Commitment.
7. TRACKING; REPORTING; AND AUDITS.
7.1 Wafer Tracking. All Wafers manufactured and delivered by Company to Conexant shall have backward and forward trace ability sufficient to enable Company to identify (i) the processes and materials used in the manufacture of such Wafers; (ii) the batches or lots of such materials; and (iii) other Wafers in the same or sequential lots. Such information shall be provided to Conexant, upon Conexant’s request.
7.2 Reporting Requirements. Company shall provide Conexant with the reports specified in Exhibit G (Reports) in accordance with frequency or schedule set forth therein. All such reports shall be in writing and provided to Conexant in the form (e.g., electronic form) specified in Exhibit G or otherwise mutually agreed to in writing by the Parties.
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processes, or methods, the foregoing indemnification obligation will apply to the extent that Company Infringement Claims are directed at the modifications, improvements, or combinations, except for modifications, improvements, or combinations performed at the direction of Conexant or its Affiliates.
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CLAIM AND EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
11.2 Basis of Bargain. EACH PARTY ACKNOWLEDGES THAT THE MUTUAL LIMITATIONS OF LIABILITY CONTAINED IN THIS SECTION 11 (LIMITATIONS OF LIABILITY) REFLECT THE ALLOCATION OF RISK SET FORTH IN THIS SUPPLY AGREEMENT AND THAT EACH PARTY WOULD NOT ENTER INTO THIS SUPPLY AGREEMENT WITHOUT THESE LIMITATIONS ON LIABILITY.
12.1 Term This Supply Agreement will take effect on the Effective Date and will remain in effect for a period of five (5) years from the Effective Date (the “Initial Term”), unless earlier terminated in accordance with this Section 12 (Term; Termination). Following the Initial Term, this Supply Agreement may be renewed for additional one-year renewal terms (each a “Renewal Term”), upon mutual agreement of the Parties.
12.2 Termination. This Supply Agreement may be terminated at any time as follows:
(a) by written agreement of the Parties;
(b) by either Party, at its discretion upon written notice to the other Party, if the other Party materially breaches any provision of this Supply Agreement and such breach is not cured within sixty (60) days after written notice of such breach is furnished by the non-breaching Party;
(c) by either Party, at its discretion upon written notice to the other Party, if within any period of twelve (12) months there are five (5) or more material breaches by the other Party that would constitute grounds for termination pursuant to this Section 12.2 (without giving effect to cure periods), regardless of whether such breaches were cured within the applicable cure periods; or
(d) by either Party, at its discretion, if (i) the other Party becomes insolvent, admits in writing its inability to pay its debts as they become due, or files or has filed against it any proceeding in bankruptcy or for reorganization under any federal bankruptcy law or similar state law, or has any receiver appointed for all or a substantial part of such Party’s assets or business, or makes any assignment for the benefit of its creditors, or enters into any other proceeding for debt relief, and such proceeding is not dismissed within sixty (60) days of filing; (ii) the other Party dissolves, liquidates, or institutes any proceedings for the liquidation or winding up of its business.
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13.2 Governing Law; Venue and Jurisdiction. This Supply Agreement will be governed by, subject to, and construed in accordance with the internal laws of the State of Delaware, as such laws apply to contracts between Delaware residents performed entirely within Delaware. The Parties agree that the United Nations Convention on Contracts for the International Sale of Goods will not apply to this Supply Agreement.
(a) Upon the written request (a “Request”) of a Party, the other Party shall commence good faith negotiations with the goal of resolving the Dispute on a mutually satisfactory basis. If the Dispute has not been resolved to the satisfaction of the Parties within fifteen (15) days after the date on which the Request is delivered, the Dispute shall immediately be referred to senior officers of each Party. The senior officers of each Party (e.g., chief executive officer and/or chief executive officer of international business) shall meet immediately, and in no case later than thirty (30) days after the date on which the Request is delivered, for a minimum of two (2) Business Days with a mutually selected mediator and attempt in good faith to negotiate a resolution of the Dispute. If the Parties are unable to resolve the Dispute within thirty-five (35) days after the date on which the Request is delivered, then any relevant Party may submit the Dispute to arbitration as the exclusive means of resolving it in accordance with the procedures set forth in this Section 13.3.
(b) Except as otherwise specified in this Section 13.3, any Dispute not resolved through the procedure set forth above shall be finally settled by arbitration in accordance with the International Rules and Procedures of the American Arbitration Association (the “Arbitration Rules”), which are deemed to be incorporated by reference herein except as otherwise modified herein.
(c) The arbitration situs shall be Wilmington, Delaware, and the laws of the State of Delaware shall be applied.
(d) In the event of arbitration, there shall be one arbitrator who shall be jointly nominated by such parties. If the Parties fail to so nominate the arbitrators within thirty (30) days from the date when the Dispute is submitted to arbitration pursuant to this Section 13.3, at the request of any Party, the arbitrator(s) shall be appointed in accordance with the Arbitration Rules.
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(e) The arbitration hearing shall commence no later than ninety (90) days following the appointment of the sole arbitrator, as the case may be, and the final award shall be rendered no later than thirty (30) days following the close of the hearing.
(f) Consistent with the expedited nature of arbitration, each Party will, upon the written request of the other Party, provide the other with copies of documents relevant to the issue raised by any claim or counterclaim. Other discovery may be ordered by the arbitrator to the extent the arbitrator deems additional discovery relevant and appropriate, and any dispute regarding discovery, relevance or scope thereof, shall be determined by the arbitrator, which determination shall be conclusive.
(g) By agreeing to arbitration, the Parties do not intend to deprive any court of its jurisdiction to issue a pre-arbitral injunction, pre-arbitral attachment, injunctive or other equitable relief or an order in aid of arbitration proceedings and the enforcement of any award. Without prejudice to such provisional remedies in aid of arbitration as may be available under the jurisdiction of a national court, the arbitral tribunal shall have full authority to grant provisional remedies and to award damages for the failure of any party to respect the arbitral tribunal’s orders to that effect.
(h) The award shall be final and binding upon the Parties, and shall be the sole and exclusive remedy between the Parties regarding any claims, counterclaims, issues, or accounting presented to the arbitral tribunal in connection with the Dispute. Judgment upon any award may be entered in any court having competent jurisdiction thereof.
(i) The costs of the arbitration shall be borne as determined in accordance with the Arbitration Rules; provided, however, that to the extent a Party is non-prevailing or unsuccessful on a claim in an arbitration proceeding under this Section 13.3 as determined by the arbitrator, that Party shall pay the prevailing or successful Party’s costs and expenses incurred in connection with the arbitration of that Dispute, including attorneys’ fees and arbitration expenses, whether or not such Dispute is prosecuted to award or judgment.
(j) Subject to the receipt of any applicable governmental approval, any monetary award shall be made and promptly payable in U.S. dollars, if due in U.S. dollars, free of any deduction or offset, and the arbitral tribunal shall be authorized in its discretion to grant pre-award and post-award interest at commercial rates. The arbitral tribunal shall have the authority to award any remedy or relief proposed by the claimants or respondents pursuant to this Supply Agreement, including without limitation, a declaratory judgment, specific performance of any obligation created under this Supply Agreement or the issuance of an injunction.
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Party. Notice hereunder will be sent to the following addresses (with a copy to the legal department):
If to Conexant, to: |
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If to Company, to: |
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Conexant Systems, Inc. 0000 Xxxxxxxx Xxxx Xxxxxxx Xxxxx, XX 00000 Attn: General Counsel Telecopy: (000) 000-0000 |
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Specialtysemi, Inc. c/o The Carlyle Group 000 X. Xxxxx Xxxxxx, 00xx Xxxxx Xxxxxxxxx, X.X. 00000 Attn: Xxxxxxxx X. Xxxxx, XX Telecopy: (000) 000-0000 |
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purposes hereof, a facsimile copy of this Supply Agreement, including the signature pages hereto, will be deemed to be an original.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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CONEXANT SYSTEMS, INC., |
SPECIALTYSEMI, INC., | ||||||||
a Delaware corporation |
a Delaware corporation | ||||||||
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By: |
\s\ Xxxxxx Xxxxxx |
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By: |
\s\ Xxxxxxxx X. Xxxxx XX |
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Name: |
Xxxxxx Xxxxxx |
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Name: |
Xxxxxxxx X. Xxxxx XX |
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Title: |
Chief Executive Officer |
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Title: |
Vice President |
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EXHIBIT A - PRICING
WAFER PRICING.
Fab Cost per Move $[…***…] per probed wafer
Basic Price. For Wafers purchased by Conexant subsequent to Segment 18, and as otherwise set forth in this Supply Agreement, the price of the Wafers shall be the “Basic Price,” determined as set forth below, less any applicable Wafer Credit. For Wafers purchased by Conexant in excess of the Wafer Volume Commitment during Segments 13 through 18, the price of the Wafers will increase from the Contract Price to the Basic Price on a stepped basis, as further described in Section 2.1(d)(i).
The Basic Price for each type of Wafer shall be determined upon the Effective Date and recalculated every six (6) months thereafter during the term hereof, and shall be the lesser of (a) the most favorable per-Wafer price offered by Company to any of its customers for comparable volumes and schedules during the six (6) months immediately preceding the date of calculation; or (b) the most favorable Wafer price offered by […***…] over the previous six (6) months for Wafers manufactured using similar process technology for comparable volumes and comparable schedules. If no similar Wafers or terms provided by these manufacturers can be found, (y) for Specialty Wafers, Company will determine the Basic Price based on the average price per Move as sold to all customers (other than, Conexant, Conexant Affiliates, or Conexant Spin-offs) for the family of Company’s Specialty Wafer products most comparable to the Wafers in question; and (z) for Non-Specialty Wafers, the Parties will agree upon a reasonable Basic Price.
Wafer Rework Pricing. Conexant shall reimburse Company for any rework requested by Conexant in an amount determined by multiplying the applicable Contract or Basic Price for the completed Wafers times a ratio determined by dividing the number of additional Moves required as a result of such rework by the total number of moves required for processing the Wafer, as set forth in Exhibit B – Schedule 2.
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PROBE SERVICES AND RE-PROBE SERVICES.
Cost (based on FY02 standards)
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$/hour |
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Platform |
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XX Xxxxxx |
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Non-XX Xxxxxx |
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Trillium |
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$ |
[...***...] |
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$ |
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[...***...] |
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Synchro |
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$ |
[...***...] |
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$ |
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[...***...] |
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Catalyst |
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$ |
[...***...] |
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$ |
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[...***...] |
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THESE COSTS ARE BASED ON ANNUAL SPEND. THE ACTUAL COST WILL BE THE GREATER OF THIS NUMBER OR THE ACTUAL SPEND RECONCILED AT THE END OF EACH SEGMENT. THE CURRENT COST PER PROBE HAS BEEN CALCULATED AT $[…***…] ON AVERAGE.
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EXHIBIT B - WAFER VOLUME COMMITMENTS
SCHEDULE 1
Conexant will submit Purchase Orders to Company for the manufacture of Wafers in volumes sufficient to sustain the MPD purchases as follows, averaged over 364 days:
Period |
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# of Work Days |
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MPD |
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I (first 12 calendar month period from Effective Date) |
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364 |
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[...***...] |
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II (second 12 calendar month period from Effective Date) |
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364 |
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[...***...] |
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III (third 12 calendar month period from Effective Date) |
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364 |
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[...***...] |
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Conexant’s current fifteen (15) month forecast is attached as Exhibit B – Schedule 1. Based on the forecasted demand and the mix of Wafers specified therein, the average conversion rate is […***…] Moves per Wafer. Conexant’s Wafer Volume Commitments, in MPD, are calculated as follows:
Period I: |
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[...***...] WSPD x [...***...] = [...***...] MPD |
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Period II: |
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[...***...] WOPD x [...***...] = [...***...] MPD |
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Period III: |
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[...***...] WOPD x [...***...] = [...***...] MPD |
These Wafer Volume Commitments include up to […***…] Engineering Wafers.
For determining compliance with the Wafer Volume Commitments, the number of MPD utilized by Conexant will be determined by converting the total quantity and type of Wafers purchased by Conexant during the calendar year to moves based on the conversion table attached as Exhibit B – Schedule 2 and dividing this number by 364 days. The Parties agree that Wafers that are delivered after the end of the Segment in which the original delivery date was scheduled as agreed by the Parties through no fault of Conexant shall count toward the Wafer Volume Commitment for the Segment in which the original delivery date was scheduled as agreed by the Parties.
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EXHIBIT B
SCHEDULE 2
WAFER MOVES TABLE
[…***…]
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EXHIBIT C — RULES OF CHANGE, OPERATION AND RELEASE PROCEDURES
[See Attached]
[…***…]
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EXHIBIT D – NEWPORT BEACH FAB CAPACITY
Maximum Capacity:
Process Family |
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Nwpt Bch |
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8” Equiv. WSPD |
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Cap. WSPD |
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1+ micron |
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[...***...] |
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0.8 um |
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[...***...] |
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0.6 um |
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[...***...] |
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0.5 um |
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[...***...] |
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0.35 um |
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[...***...] |
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0.25 um |
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[...***...] |
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0.18 um & below |
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[...***...] |
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Bipolar |
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[...***...] |
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BiCMOS |
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[...***...] |
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SiGe BiCMOS |
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[...***...] |
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Subtotal WSPD |
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[...***...] |
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ELOTS |
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[...***...] |
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Total WSPD |
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[...***...] |
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Total int vs. Ext |
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EXHIBIT E – WAFER CYCLE TIMES
The following table sets forth the average Wafer process cycle time for the Newport Beach Fab:
PROCESS |
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Days Per Layer |
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[...***...] |
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[...***...] |
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[...***...] |
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[...***...] |
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[...***...] |
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[...***...] |
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[...***...] |
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[...***...] |
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[...***...] |
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[...***...] |
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[...***...] |
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[...***...] |
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[...***...] |
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[...***...] |
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All new or unidentified processes will be added to this table once at least three (3) lots have been manufactured to set an average cycle time. THESE CYCLE TIMES ARE FOR PLANNING PURPOSES ONLY AND NOT AN OBLIGATION FOR DELIVERY, BUT THE COMPANY WILL WORK TO MEET THESE CYCLE TIMES.
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EXHIBIT F - QUALITY SPECIFICATIONS
IX. RELEASED MATERIAL SPECIFICATIONS REPORT
A. Released Material Specifications as of 10-jan-2002 11:04 PM
[…***…]
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X. RELEASED WAFER PROCUREMENT REPORT
A. Released Wafer Procurements as of 10-jan-2002 11:03 PM
[…***…]
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EXHIBIT G - DELIVERY AND LOGISTICS
[To be expanded as necessary.]
Processing Requirements.
Company shall provide the following processing for all wafers:
1. Handling and packaging for delivery (packaging specification attached as Exhibit G – Schedule 1).
2. Box and hold (if specified).
3. Preparing required shipping paperwork (airway xxxx, export documentation).
4. Customs clearance documentation, packing list, etc.
5. Export control clearance.
6. Posting delivery in […***…].
7. Contacting the specified carrier.
8. Handing product off to the specified carrier at the appropriate location.
9. Tape and reel (when specified).
Handling and Receiving Services. Company will provide handling and receiving services to Castle at the Newport Beach Fab including the following:
1. Returned goods material authorization (RMA) receipt, notification and delivery to Castle quality control (per log into the appropriate information system).
2. Receive, count, notify and deliver documents and goods delivered to the subject shipping locations for Castle personnel and functions.
3. Receive Castle production goods (wafers, die, and/or packaged parts) and either: (a) transfer to another production location; (b) enter into Company’s Probe Services; or (c) enter into Castle finished goods (system) and store in a secure, physically separate and secure finished goods area as specified below.
Finished Goods Storage. Company will provide finished goods storage for Castle on consistent with the following:
1. Product storage consistent with IEEE (spec#?).
2. Product stored in a separate and secure storage location.
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3. Inventory quantity maintained accurately in the appropriate system ([…***…]) including periodic cycle counts as required to maintain accuracy.
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EXHIBIT H - REPORTS
Company shall prepare and provide the following reports to Castle. Such reports shall be comparable in form, substance, and content to those reports prepared by the Newport Beach Fab as of the Effective Date and shall be provided in accordance with the schedule and in the form specified below:
1. Work in process (WIP) reports – daily; electronic form
2. E-Test (WAT/PCM) data – upon request; electronic form
3. In-line control data – upon request; electronic or paper form
4. Yield trend charts – upon request; electronic or paper form
5. Customer line item performance (CLIP) – upon request; electronic or paper form
6. On-time delivery report – weekly; electronic form
7. Commitment to forecast – monthly; electronic form
8. Scrap reports – daily; electronic form
9. Capacity availability – quarterly; electronic form
10. PPM levels – upon request; electronic form
11. Probe data – upon request; electronic or paper form
12. Test data – upon request; electronic form
13. SPC (Cp/Cpk) data for key nodes – upon request; electronic form