Exhibit 10.3
AGREEMENT
This agreement
(“Agreement”) is made and entered into by and among
Spansion Inc., a Delaware corporation with an office at 915
DeGuigne Drive, Sunnyvale, CA 94088-3453, U.S.A., Fujitsu Limited,
a Japanese corporation having a place of business at 1-1,
Kamikodanaka 4-chome, Nahahara-ku, Kawasaki, 211-8588, Japan, and
Fujitsu Microelectronics Limited, a Japanese corporation having a
place of business at 50 Fuchigami, Akiruno, Tokyo, 197-0833, Japan,
which is a Subsidiary (as defined in Section 1.6) of Fujitsu
Limited as of the Effective Date. Spansion and Fujitsu are referred
to individually as a “Party” or collectively as the
“Parties.”
WHEREAS, Fujitsu (as defined in
Section 1.4) engaged in extensive company-wide, portfolio-wide
patent cross license discussions with Texas Instruments
Incorporated (“Texas Instruments”) during 2005-2006 and
entered into a patent cross license agreement with Texas
Instruments on December 21, 2006 (the “TI License
Agreement”);
WHEREAS, during those discussions,
Fujitsu demanded that its former subsidiary, Spansion Inc. (as
defined in Section 1.3), defend and/or indemnify Fujitsu
against Texas Instruments’ allegations that the Flash Memory
Products (as defined in Section 1.2) that Fujitsu makes,
assembles, packages, uses, sells, distributes, offers to sell
and/or transfers for Spansion pursuant to the Distribution
Agreement (as defined in Section 1.5) infringe Texas
Instruments patents;
WHEREAS, Spansion denied, and
continues to deny, that it has or had any duty to defend or
indemnify Fujitsu under paragraph 19 of the Distribution Agreement
and also continues to deny that it infringes any valid and
enforceable patent held by Texas Instruments;
WHEREAS, Fujitsu has claimed, and
continues to claim, that Spansion had an obligation to defend
Fujitsu against allegations that Texas Instruments made during the
cross license discussions that the Flash Memory Products infringe
Texas Instruments patents;
WHEREAS, on August 9, 2006,
Fujitsu served Spansion with a “Notice of Default and
Intention to Terminate” the Distribution Agreement between
them on account of what Fujitsu alleges is Spansion’s breach
of its obligation;
WHEREAS, Fujitsu and Spansion held
multiple discussions to resolve their dispute but were unable to
reach a resolution;
WHEREAS, Fujitsu and Spansion agreed
to enter into this Agreement to achieve a business resolution that
avoids termination of the important and significant business
relationship covered by the Distribution Agreement;
Now, therefore, the Parties have agreed as
follows:
The following terms used herein
shall have the meaning attached to them as follows:
1.1. “Actual
Revenue” shall mean
the invoice amount from Spansion to Fujitsu under section 12.5 of
the Distribution Agreement and/or the invoice amount from Fujitsu
to Spansion under Section 9 of the Foundry Agreement, for the
sale or transfer of a Flash Memory Products. Actual Revenue shall
not include sales, consumption or similar taxes, accepted returns
of product, shipping and insurance, commissions actually paid,
refunds given in the normal course of business and bona fide price
adjustments. Actual Revenue shall be reported in United States
dollars. Sales or other transfers made in currencies other than
United States dollars shall be converted at the exchange rate as of
the last day of the applicable fiscal quarter.
1.2. “ Flash Memory Products”
shall mean all Spansion products (including memory, software and
systems), and components, whether or not containing
Spansion’s commercial indicia, that Fujitsu manufactures,
assembles, packages, uses, sells, offers to sell, leases, exports,
imports or otherwise transfers worldwide under either the
Distribution Agreement or the Foundry Agreement.
1.3
“Spansion” shall mean Spansion Inc. and its Subsidiaries
worldwide.
1.4
“Fujitsu” shall mean Fujitsu Limited, its Subsidiaries,
and/or any other entity licensed or sublicensed under the TI
License Agreement, as applicable.
1.5 “Distribution
Agreement” shall
mean the Amended and Restated Distribution Agreement entered into
between Spansion and Fujitsu dated December 21, 2005, as
amended or succeeded by a New Agreement (as defined in
Section 13 of Amendment No. 1 to the Amended and Restated
Fujitsu Distribution Agreement dated December 21, 2005) or by
any distribution agreement between Fujitsu and Spansion.
1.6.
“Subsidiary” shall mean any corporation, company or other
entity more than fifty percent (50%) of the outstanding shares
or securities entitled to vote for the election of directors or
other managing authority of, or ownership interest entitled to make
decisions for, such corporation, company or other entity (other
than any shares or securities or ownership interest whose voting
rights or decision-making is subject to restriction) is owned or
controlled by either Party hereto, directly or indirectly, now or
hereafter at any time during the term of this Agreement.
1.7 “Foundry
Agreement” shall
mean the Foundry Agreement entered into between Spansion and
Fujitsu dated September 28, 2006.
2.1 . Payments . For five (5) years
after the Effective Date, Spansion shall pay Fujitsu royalties at a
rate of [*******] of Actual Revenue of the Flash Memory Products
for the first two years, and then [*******] of Actual Revenue of
the Flash Memory Products for the remainder of the term. Within
forty-five (45) days of the end of Spansion’s fiscal
quarter (which approximate
March 31, June 30, September 30, December 31
but do not fall on these exact dates due to Spansion’s 52-53
week fiscal year which ends on the last Sunday in December),
Spansion shall send Fujitsu a report of Actual Revenue of the Flash
Memory Products for that fiscal quarter (the “Actual Revenue
Report”). The Actual Revenue Report shall include an
individual Flash Memory Product only one time using only the Actual
Revenue amount reported by Spansion and agreed to by Fujitsu. To
avoid any doubt, Fujitsu is not entitled to multiple payments on a
particular Flash Memory Product (specifically, Fujitsu shall not be
entitled to payment for wafers sold to Spansion under the Foundry
Agreement that are incorporated into the Flash Memory Products sold
by Spansion to Fujitsu under the Distribution Agreement on which
Spansion makes payments hereunder), and the Parties shall agree on
a method to avoid such multiple payments. Within ten (10) days
of receipt, Fujitsu shall review the Actual Revenue Report and
(a) issue an invoice to Spansion based on all reported Actual
Revenue with which it agrees and (b) notify Spansion if it
disagrees with any portion of the Actual Revenue Report. Spansion
shall pay all amounts due to Fujitsu within fifteen
(15) working days after the receipt of Fujitsu’s
invoice. Notwithstanding any disagreement over the Actual Revenue
Report, Spansion shall make the payment due on the amount it has
reported that is not disputed.
2.2. Limitation on
Payments .
Spansion’s obligation to make payments under this Agreement
is restricted to the payment of a maximum amount of [*******] US
over the term of this Agreement. To avoid any doubt, once Spansion
has paid Fujitsu [*******] US in cumulative payments under this
Agreement, without regard to any refund paid by Fujitsu or offsets
taken by Spansion, Spansion shall be fully paid up and shall not be
obligated to make any further payments to Fujitsu hereunder. This
limitation on Spansion’s obligation to make payments under
this Agreement does not alter Fujitsu’s continued obligation
to make royalty payments to third parties.
2.3. Taxes.
Payments pursuant to this Agreement
shall be made free and clear of, and without deduction of or on
account of any taxes, customs, levies, tariffs, duties, interest,
penalties or other charges, except to the extent such withholding
or deduction is required by applicable law, regulation, or
government order in the United States of America or any political
subdi
