AMD DISTRIBUTION AGREEMENT

Distribution Agreement

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Title: AMD DISTRIBUTION AGREEMENT
Governing Law: California Date: 3/1/2005
Industry: Semiconductors Sector: Technology

AMD DISTRIBUTION AGREEMENT, Parties: advanced micro devices in

Exhibit 10.42

Redacted Version

Confidential Treatment Marked

AMD DISTRIBUTION AGREEMENT

JUNE 30, 2003

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as ****. A complete version of the exhibit has been filed separately with the Securities and Exchange Commission.

AMD DISTRIBUTION AGREEMENT

THIS DISTRIBUTION AGREEMENT (this “ Agreement ”) is made and entered into as of June 30, 2003 (the “ Effective Date ”), by and between FASL LLC, a Delaware limited liability company (“ FASL ”), and Advanced Micro Devices, Inc., a Delaware corporation (“ AMD ”). FASL and AMD are hereinafter also referred to as the “ Parties ” and individually as a “ Party .”

RECITALS

WHEREAS , pursuant to the Amended and Restated Limited Liability Company Operating Agreement, dated June 30, 2003 (the “ LLC Operating Agreement ”), among AMD, AMD Investments, Inc., a Delaware corporation (“ AMDI ”), Fujitsu Limited, a Japanese corporation (“ Fujitsu ”), and Fujitsu Microelectronics Holding, Inc., a Delaware corporation (“ FMH ”), and the Contribution and Assumption Agreement (the “ Contribution Agreement ”), among AMD, AMDI, Fujitsu, FMH and FASL, AMD and Fujitsu have formed FASL for the purpose of designing, manufacturing and marketing flash memory products; and

WHEREAS, as part of such joint venture arrangement, AMD and Fujitsu have agreed that FASL will appoint AMD and Fujitsu as FASL’s sole initial distributors of Products (as defined below).

NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and other terms and conditions contained herein, FASL and AMD agree as follows:

AGREEMENT

1. D EFINITIONS ; I NTERPRETATION

1.1 Capitalized but Undefined Terms . Capitalized terms used in this Agreement but not defined herein shall have the meaning ascribed to such terms in the LLC Operating Agreement.

1.2 Terms Defined in this Agreement . The following terms when used in this Agreement shall have the following definitions:

1.2.1 “ Action Plan ” has the meaning set forth in Section 14.2.1.

1.2.2 “ Affiliate ” is defined in the LLC Operating Agreement.

1.2.3 “ AMD Account ” means a Customer listed as such on Schedule 2.1 .

1.2.4 “ AMD Extended Period Support Customer ” means a Customer listed as such on Schedule 2.1 .

1.2.5 “ AMD PRC Customers ” means the Customers set forth in Section A of Schedule 1.2.5 and such other Customers that are specified as AMD PRC Customers in accordance with Section B of Schedule 1.2.5 .

1.2.6 “ AMD Short Term Support Customer ” means a Customer listed as such on Schedule 2.1 .

1.2.7 “ AMD Territory ” means the Americas and Europe.

1.2.8 “ AMD Transitional Support Customer ” means, collectively, the AMD Short Term Support Customers and the AMD Extended Period Support Customers.

1.2.9 “ Americas ” means the countries and territories of North America, Central America and South America.

1.2.10 “ Best Efforts ” means the efforts that a prudent Entity or person desiring to achieve a particular result would use in order to achieve such result reasonably expeditiously. An obligation to use “Best Efforts” does not require the Entity or person subject to such obligation to take actions that would result in a materially adverse change in the benefits to such Entity or person of this Agreement.

1.2.11 “ Channel Partner ” means any Entity other than an AMD Subsidiary who is appointed by AMD as a sub-distributor or sales representative, pursuant to a written agreement between AMD and such Entity in accordance with Section 5.2. A list of Channel Partners as of the Effective Date is set forth in Schedule 1.2.11 . AMD will provide FASL with an updated Schedule 1.2.11 or other reasonable form of notice from time to time whenever it appoints a new Channel Partner or terminates an existing Channel Partner.

1.2.12 “ Claims ” is defined in Section 19.

1.2.13 “ Combined Product ” means any Product that contains both (a) FASL Content, and (b) components or products manufactured by any other Entity, which components or products do not constitute FASL Content.

1.2.14 “ Confidential Information ” has the meaning set forth in Section 16.1.

1.2.15 “ Customer ” means an Entity, other than AMD in its capacity as distributor hereunder, that purchases Products, but excluding Channel Partners.

1.2.16 “ Custom Product ” means any Product that has sufficiently unique attributes that it may only be sold to a single Customer or to a limited number of Customers. In addition, if a Product is being discontinued or has been discontinued on a general basis, as set forth in Section 10.2 below, but may still be made available to specific Customers, then it too shall be considered a Custom Product. FASL will identify all Custom Products as such in FASL’s then-current Quarterly price list or other reasonable form of communication to AMD, including an end-of-life notice, if applicable.

1.2.17 “ Disclosing Party ” has the meaning set forth in Section 16.1.

1.2.18 “ Documentation ” means any and all documents or materials, whether in printed form or in any electronic form or media, that relate to Products and are provided by FASL to AMD hereunder, including marketing materials and brochures, manuals, published Product price lists and Product specifications, but expressly excluding documents that constitute Confidential Information of FASL.

1.2.19 “ Entity ” means a corporation, partnership, limited liability company, unincorporated organization, business association, firm, joint venture or other legal entity.

1.2.20 “ Europe ” means the countries and territories of Europe, as listed on Schedule 1.2.20 .

1.2.21 “ FAE ” means a field applications engineer.

1.2.22 “ FASL Board ” means the Board of Managers of FASL.

1.2.23 “ FASL Content ” means components or products manufactured by FASL or a FASL Subsidiary, or components or products specifically manufactured by any other Entity, including AMD or Fujitsu or any third party subcontractor or foundry, on behalf of FASL or a FASL Subsidiary at FASL’s or the FASL Subsidiary’s direction and based on (a) technology or intellectual property owned by FASL, or which FASL otherwise has the right to use, or (b) designs provided by FASL, which designs are proprietary to FASL or a third party licensor of FASL.

1.2.24 “ FASL Content Only Product ” or “ FCO Product ” means any Product that contains only FASL Content.

1.2.25 [Intentionally omitted.]

1.2.26 “ Force Majeure ” has the meaning set forth in Section 21.9.1.

1.2.27 “ Forecast ” has the meaning set forth in Section 4.1.

1.2.28 “ Forecasted Product Requirements ” has the meaning set forth in Section 4.1.

1.2.29 “ Fujitsu Account ” means a Customer listed as such on Schedule 2.1 .

1.2.30 “ Fujitsu Extended Period Support Customer ” means a Customer listed as such on Schedule 2.1 .

1.2.31 “ Fujitsu PRC Customers ” means the Customers set forth in Section A of Schedule 1.2.31 and such other Customers that are specified as Fujitsu PRC Customers in accordance with Section B of Schedule 1.2.31 .

1.2.32 “ Fujitsu Short Term Support Customer ” means a Customer listed as such on Schedule 2.1 .

1.2.33 “ Fujitsu Territory ” means Japan.

1.2.34 “ Fujitsu Transitional Support Customers ” means, collectively, the Fujitsu Short Term Support Customers and the Fujitsu Extended Term Support Customers.

1.2.35 “ Global Account ” means a Customer listed as such on Schedule 2.1 .

1.2.36 “ Guidelines ” has the meaning set forth in Section 6.4.

1.2.37 “ INCOTERMS 2000 ” means the International Rules for the Interpretation of Trade Terms, published by the International Chamber of Commerce in the year 2000.

1.2.38 “ Intellectual Property Rights ” means, on a world-wide basis, any and all now known or existing, or hereafter known or existing, tangible and intangible (a) rights associated with works of authorship, including copyrights, moral rights and mask-works, (b) rights associated with trademarks, service marks, trade names, logos and similar rights, (c) trade secret rights, (d) rights in patents, designs and algorithms and other industrial property rights, (e) rights in domain names; (f) all other intellectual and industrial property rights of every kind and nature and however designated, whether arising by operation of law, contract, license or otherwise, and (f) all registrations, applications, renewals, extensions, continuations (including continuations in part), divisions, reexaminations or reissues thereof now or hereafter existing, made or in force (including any rights in any of the foregoing).

1.2.39 “ Joint Territory ” means anywhere in the world other than the AMD Territory and the Fujitsu Territory.

1.2.40 “ Leads ” has the meaning set forth in Section 11.4.

1.2.41 “ Marketing Plan ” has the meaning set forth in Section 11.1.2.

1.2.42 “ Ownership Interest ” means the percentage interest of FASL common membership interests then held collectively by AMD and its Subsidiaries, divided by all then issued and outstanding FASL common membership interests.

1.2.43 “ PRC ” means the People’s Republic of China.

1.2.44 “ Product Distribution Center ” has the meaning set forth in Section 7.1.

1.2.45 “ Production Volume ” means, for a particular Technology for a particular Quarter, FASL’s projected volume of Wafer Outputs for such Technology during such Quarter, as determined by FASL at the beginning of the relevant Quarter using FASL’s then-current QBP for such Quarter.

1.2.46 “ Product ” means any finished product of FASL.

1.2.47 “ Purchase Order ” has the meaning set forth in Section 3.1.

1.2.48 “ Purchase Price ” means the price per Product at which FASL shall sell such Product to AMD in accordance with Section 12.

1.2.49 “ Q0 ” has the meaning set forth in Section 4.2.3.

1.2.50 “ Q1 ” has the meaning set forth in Section 4.2.3.

1.2.51 “ Q2 ” has the meaning set forth in Section 4.2.3(b).

1.2.52 “ Q3 ” has the meaning set forth in Section 4.2.3(c).

1.2.53 “ Quarter ” means a FASL fiscal quarter.

1.2.54 “ Receiving Party ” has the meaning set forth in Section 16.1.

1.2.55 “ RSP ” has the meaning set forth in Section 12.1.

1.2.56 “ Standard Product ” means any Product that is not a Custom Product. FASL will identify all Standard Products as such in FASL’s then-current Quarterly price list.

1.2.57 “ Stocking Channel Partner ” means a Channel Partner that is designated as such by AMD pursuant to Section 5.3.3.

1.2.58 “ Subsidiary ” is defined in the Contribution Agreement.

1.2.59 “ Technology ” means each process technology used by FASL in the production of Products. A list of Technologies as of the Effective Date is set forth in Schedule 1.2.59. FASL will provide AMD with an updated Schedule 1.2.59 or other reasonable form of notice from time to time whenever it adds a new Technology, or whenever it decides to no longer produce Products using a then-existing Technology.

1.2.60 “ Term ” has the meaning set forth in Section 20.1.

1.2.61 “ Trademarks ” means any trademarks, trade names, service marks and logos used by FASL in connection with Products, including those marks, names and logos set forth in Schedule 1.2.61 attached hereto.

1.2.62 “ Transition Plan ” has the meaning set forth in Section 2.1.4.

1.2.63 “ VAT ” has the meaning set forth in Section 12.8.

1.2.64 “ Wafer Output ” means a semiconductor wafer manufactured by or for FASL for a specific Technology.

1.2.65 “ Warranty Period ” has the meaning set forth in Section 15.1.

1.3 Interpretation.

1.3.1 Certain Terms . The words “hereof,” “herein,” “hereunder” and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement. The term “including” is not limited and means “including without limitation.”

1.3.2 Section References; Titles and Subtitles . Unless otherwise noted, all references to Sections, Schedules and Exhibits herein are to Sections, Schedules and Exhibits of this Agreement. The titles, captions and headings of this Agreement are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

1.3.3 Reference to Entities, Agreements, Statutes . Unless otherwise expressly provided herein, (a) references to an Entity include its successors and permitted assigns, (b) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments, restatements and other modifications thereto or supplements thereof and (c) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such statute or regulation.

2. A PPOINTMENT ; G RANT OF R IGHTS

2.1 Grant of Distribution Rights; Transitional Support.

2.1.1 Grant of Rights . Subject to the terms and conditions of this Agreement, FASL grants to AMD the right to market, sell and otherwise distribute Products during the Term (a) in the AMD Territory and in the Joint Territory, (b) to AMD Affiliates, AMD Accounts and Global Accounts wherever located and (c) to AMD PRC Customers in the PRC. No other grant of distribution rights to AMD is implied by this Agreement.

2.1.2 Transitional Support.

(a) Subject to the terms and conditions of this Agreement, FASL grants AMD the following rights during the Term with respect to AMD Transitional Support Customers:

(i) With respect to each AMD Short Term Support Customer, FASL grants AMD the right to market, sell and otherwise distribute Products in the Fujitsu Territory to such Customer; provided , however , that (A) AMD shall not engage in any new design activity in the Fujitsu Territory for any such Customer, and (B) AMD shall transition sales support for each such Customer in the Fujitsu Territory to Fujitsu as soon as reasonably practicable (as reasonably determined by FASL, taking into account various factors, including the preservation of Customer relationships and Customer demands and requirements). This right shall terminate as to each such Customer upon completion of the transition with respect to such Customer.

(ii) With respect to each AMD Short Term Support Customer that is also a Fujitsu Account, FASL grants AMD the right to market, sell and otherwise distribute Products throughout the world to such Customer; provided , however , that (A) AMD shall not engage in any new design activity anywhere in the world for such Customer, and (B) AMD shall transition sales support for each such Customer to Fujitsu as soon as reasonably practicable (as reasonably determined by FASL, taking into account various factors, including the preservation of Customer relationships and Customer demands and requirements). This right shall terminate as to each such Customer upon completion of the transition with respect to such Customer.

(iii) With respect to each AMD Extended Period Support Customer, FASL grants to AMD the right to market, sell and otherwise distribute Products in the Fujitsu Territory to such Customer. At such time that FASL reasonably determines that (A) Fujitsu has sufficient resources to provide such Customer with a sufficient level of support in the Fujitsu Territory as AMD (as measured by various factors, including the number of salespeople and the level of technical competence of Fujitsu’s sales force in light of such Customer’s Product needs), and (B) such Customer is open and willing to purchase Products from Fujitsu in the Fujitsu Territory, FASL shall issue a certification in writing to AMD (with a copy to Fujitsu) that FASL has made such determination. Upon receipt of such certification, this right shall terminate.

(b) Subject to the terms and conditions of this Agreement:

(i) With respect to each Fujitsu Short Term Support Customer, AMD agrees and acknowledges that, pursuant to the Fujitsu Distribution Agreement, FASL shall grant to Fujitsu the right during the Term to market, sell and otherwise distribute Products in the AMD Territory to such Customer; provided , however , that upon the transfer of sales support for each such Customer from Fujitsu to AMD in accordance with the Fujitsu Distribution Agreement, this right shall terminate.

(ii) With respect to each Fujitsu Short Term Support Customer that is also an AMD Account, AMD agrees and acknowledges that, pursuant to the Fujitsu Distribution Agreement, FASL shall grant to Fujitsu the right during the Term to market, sell and otherwise distribute Products throughout the world to such Customer; provided, however , that upon the transfer of sales support for each such Customer from Fujitsu to AMD in accordance with the Fujitsu Distribution Agreement, this right shall terminate.

(iii) With respect to each Fujitsu Extended Period Support Customer, AMD agrees and acknowledges that, pursuant to the Fujitsu Distribution Agreement, FASL shall grant to Fujitsu during the Term the right to market, sell and otherwise distribute Products in the AMD Territory to such Customer. At such time that FASL reasonably determines that (A) AMD has sufficient resources to provide such

Customer with a sufficient level of support in the AMD Territory as Fujitsu (as measured by various factors, including the number of salespeople and the level of technical competence of AMD’s sales force in light of such Customer’s Product needs), and (B) such Customer is open and willing to purchase Products from AMD in the AMD Territory, FASL shall issue a certification in writing to Fujitsu (with a copy to AMD) that FASL has made such determination. Upon receipt of such certification, this right shall terminate.

2.1.3 Location of Sale . For purposes of determining the location of a sale of any Product, the “ship to” location on the Purchase Order shall be determinative.

2.1.4 Transition Plan . Promptly after the Effective Date, AMD and FASL shall meet and develop written transition plans for each AMD Short Term Support Customer, each such plan setting forth in reasonable detail the steps and actions that each Party shall be required to take, and the events that shall be required to occur, in order for support for the relevant Customer to transfer from AMD to Fujitsu (each, a “ Transition Plan ”). Each Party will act in accordance with the Transition Plans. In addition, FASL shall use Best Efforts to require Fujitsu to comply with the transition plans that are developed and agreed by FASL and Fujitsu in accordance with the Fujitsu Distribution Agreement.

2.2 Appointment of Other Distributors by FASL.

2.2.1 In the Joint Territory . FASL shall have the right to appoint additional distributors or sales representatives in the Joint Territory.

2.2.2 In the AMD Territory; Other Customers . Subject to Section 14 and for so long as AMD maintains an Ownership Interest of at least twenty-five percent (25%), FASL shall not have the right to appoint any additional distributors or sales representatives, or grant any existing distributor or sales representative (other than AMD) any additional rights, in the AMD Territory or with respect to an AMD Account, Global Account or AMD PRC Customer without AMD’s prior written consent, which consent may be withheld in its sole discretion.

2.2.3 No Sales by FASL . Notwithstanding anything to the contrary herein, unless otherwise agreed by the parties on a case-by-case basis, in no event shall FASL sell or otherwise distribute any Products (or any wafers, die or work-in-progress), except through (i) AMD pursuant to and in accordance with the terms of this Agreement, (ii) Fujitsu pursuant to and in accordance with the terms of the Fujitsu Distribution Agreement, (iii) the appointment of additional distributors or sales representatives in accordance with the terms of this Agreement or the Fujitsu Distribution Agreement; or (iv) as may otherwise be permitted by procedures that may be added to the LLC Operating Agreement subsequent to the Effective Date in accordance with its terms.

2.3 AMD Obligations and Restrictions.

2.3.1 Best Efforts . AMD shall use its Best Efforts to promote the sale of Products in the AMD Territory. In light of the foregoing, the application of the provisions of Section 2306(2) of the California Commercial Code to the Parties is hereby excluded.

2.3.2 Commitments . Notwithstanding anything to the contrary herein, AMD shall have **** on behalf of FASL with respect to Product availability.

2.3.3 Inventory . AMD shall not, and shall cause its Subsidiaries not to, maintain an inventory of Products intended to be used for re-sale by Customers, provided that AMD and any AMD Subsidiary may maintain a limited, reasonable number of Products to use as Product samples in connection with demand creation activities in accordance with Section 11.5. Notwithstanding anything to the contrary in the foregoing, AMD and its Subsidiaries shall have the right, as of the Effective Date, to collectively possess **** inventory of Products across all Technologies, which inventory AMD and its Subsidiaries may retain and sell in the ordinary course of business, provided that such inventory shall be eliminated within a reasonable period of time after the Effective Date. The foregoing restrictions and obligations regarding inventory shall not apply to Channel Partners.

2.3.4 NADC . Notwithstanding anything to the contrary in the foregoing, AMD shall have the right, from and after the Effective Date, to hold up to **** inventory of Product in its North America Distribution Center (“NADC”), provided that NADC’s target level of Product inventory shall be **** inventory. From time to time, AMD may request the right to hold more than **** inventory at NADC to address special market opportunities and FASL will not unreasonably withhold its consent to permit AMD to hold additional inventory at NADC to address those opportunities, taking into account existing firm purchase orders from Customers and AMD’s then-current good faith forecast for quick-turn business opportunities. Title and risk of loss with respect to such inventory shall remain with FASL until such time that AMD places a Purchase Order for the relevant Products in accordance with Section 3.1. AMD will maintain any such inventory at no cost to FASL, and will report on the amount and status of such inventory from time-to-time as reasonably requested by FASL. Without limiting the foregoing, AMD agrees to use Best Efforts to provide FASL as soon as it may be practicable daily point-of-sales reports in a format and including the information reasonably designated by FASL regarding all such inventory. Initial point-of-sale reports will contain the types of information specified in Schedule 2.3.4. Notwithstanding anything to the contrary in Section 12.5 below, payments for Products held at the NADC in accordance with this Section 2.3.4 shall be made within sixty (60) days from the date of shipment of such Products to a Customer or Channel Partner.

3. O RDERING ; S HIPPING

3.1 Orders . AMD will accept purchase orders for Products from Customers and Channel Partners in accordance with its customary practices. To purchase Product(s) from FASL, AMD shall issue purchase orders (“ Purchase Orders ”), which shall specify the Purchase Order number, type and quantity of Product(s) ordered, Purchase Price (and the price to be paid to AMD for the Product(s) by the relevant Customer or Channel Partner, but only if such price is

**** the **** for the Product(s)), place(s) of delivery (which shall be the location identified in the relevant Customer or Channel Partner purchase order issued to AMD), and delivery date(s). These Purchase Orders may take the form of electronic submissions in a mutually-acceptable format (including submissions currently referred to as “ B+B+B files ”) so long as they contain the same information specified above for Purchase Orders, even if such submissions may not be referred to specifically as “purchase orders” when transmitted. AMD shall place each Purchase Order with FASL sufficiently in advance of the delivery date to allow for FASL’s Product delivery lead times, as set forth in FASL’s most recent lead time report provided to AMD. FASL shall accept any Purchase Order submitted by AMD to the extent that such Purchase Order (a) is within the Product allocation assured to AMD in accordance with Section 4.2, (b) conforms to the foregoing lead times, and (c) does not provide for a “ship to” location, Customer or Channel Partner that is inconsistent with AMD’s distribution rights hereunder. FASL will not accept any order to purchase Products under this Agreement from any Entity or person other than AMD without AMD’s prior written consent. Notwithstanding the foregoing, with respect to Purchase Orders for Custom Products, FASL shall not be required to accept such Purchase Orders, but FASL shall not unreasonably withhold acceptance of any such Purchase Order that is consistent with the terms of this Agreement, taking into account such factors as the requested delivery date, pricing and inventory. FASL shall not withhold acceptance of any Purchase Order for Custom Products on a basis that provides AMD less favorable treatment than any other FASL distributor or sales representative submitting orders for similar quantities of the same or similar Custom Products; provided that any pre-existing commitments to any distributor may take precedence over any new commitments for Custom Products so long as FASL makes such determinations on a commercially reasonable and non-discriminatory basis. FASL shall notify AMD as soon as possible if FASL believes that a Purchase Order for either Standard Products or Custom Products does not meet the foregoing requirements for acceptance by FASL. If the Purchase Order includes a pricing term inconsistent with the terms of this Agreement, such pricing term shall not apply and the pricing provisions set forth in Section 12 below shall take precedence.

3.2 Cancellations . AMD may cancel any Purchase Order or portion thereof for Standard Products, without charge, upon written notice to FASL at least thirty (30) days prior to the applicable delivery date. FASL will determine cancellation policies, procedures and charges with respect to Custom Products, and with respect to Standard Products where notice of cancellation is given less than thirty (30) days prior to the applicable delivery date, in advance of AMD’s placement of the applicable Purchase Order and will inform all distributors of such cancellation policies and apply such policies to all distributors, although the parties acknowledge that exceptions may be made on a case-by-case basis to address particular Customer situations. The Parties will discuss in good faith any cancellations of delivery of Custom Products, or of Standard Products where notice of cancellation is given less than thirty (30) days prior to the applicable delivery date, requested by AMD, but the final determination will be FASL’s.

3.3 Reschedules. AMD may reschedule the delivery of any Purchase Order or portion thereof for Standard Products, without charge, one time only, upon notice to FASL at least thirty (30) days prior to the applicable delivery date. Standard Product reschedules may be made less than thirty (30) days prior to the applicable delivery date, but only upon the agreement of FASL.

Any reschedules on less than thirty (30) days prior notice shall be subject to reschedule fees payable to FASL in an amount set by FASL in advance of AMD’s placement of the applicable Purchase Order. FASL will also determine reschedule policies, procedures and rights and charges with respect to Custom Products in advance of AMD’s placement of the applicable Purchase Order. FASL will inform all distributors of its reschedule policies in respect of Standard Products and Custom Products and apply such policies to all distributors although the parties acknowledge that exceptions may be made on a case-by-case basis to address particular Customer situations. The Parties will discuss in good faith any rescheduling of delivery of Custom Products, or of Standard Products where notice of rescheduling is given less than thirty (30) days prior to the applicable delivery date, requested by AMD, but the final determination will be FASL’s.

3.4 Shipping . FASL shall notify AMD at the time of shipment as to the quantity of Product(s) shipped and the specific shipping information. Shipping quantities may not vary from those established by the Purchase Order unless otherwise mutually agreed upon in writing by the Parties. FASL shall deliver the ordered Product by the applicable delivery date(s), provided that FASL may not deliver such Product earlier than the delivery date specified in the applicable Purchase Order. Upon a bona fide, reasonable, **** , AMD may specify that Product shipments may not be late and if FASL has agreed in advance for **** that a particular shipment—or shipments in general **** —will be subject to timeliness requirements, then in the event that any shipment is delayed and not timely, AMD may direct FASL to ship such Products by reasonable premium transportation designated by AMD and FASL shall bear the reasonable expense of any difference in cost due to such premium transportation. FASL shall ship the ordered Product(s) to the delivery address(es) set forth in the applicable Purchase Order.

3.5 Title and Risk of Loss.

3.5.1 Shipment from FASL Facility Directly to Customers or Stocking Channel Partners . Delivery of Products from any FASL facility directly to Customers or Stocking Channel Partners, or to AMD’s **** , shall be **** in accordance with INCOTERMS 2000, unless otherwise agreed in writing by the Parties, and title and risk of loss shall pass from FASL to AMD **** , which shall be **** , a **** or a **** .

3.5.2 Shipment from Product Distribution Centers . Delivery of Products from any Product Distribution Center to a Customer or a Stocking Channel Partner, or to AMD’s **** , shall be **** in accordance with INCOTERMS 2000, unless otherwise agreed by the Parties, and title and risk of loss shall pass from FASL to AMD **** at **** at the **** , in accordance with **** , as interpreted in accordance with INCOTERMS 2000. Without limiting the foregoing, AMD will bear **** attributable to **** from the **** to a **** . FASL will bear **** to ship Products directly from FASL, a FASL Subsidiary or a FASL subcontractor facility to the Product Distribution Center, the AMD Sub **** .

4. F ORECASTS ; P RODUCT A LLOCATIONS

4.1 Forecasts . AMD working together with FASL shall, on or before the end of the last week of the first month of each Quarter, provide FASL with a non-binding forecast (a

“ Forecast ”) setting forth AMD’s projected Product needs for each of the five (5) Quarters following such Quarter (“ Forecasted Product Requirements ”). Each Forecast will be organized by FASL on a Technology-by-Technology basis, and will contain a forecast for each Product within a particular Technology. AMD’s initial Forecast is attached hereto as Schedule 4.1 .

4.2 Short-Supply Guaranteed Allocation.

4.2.1 Allocation . Subject to Section 4.2.3 below, in the event that, in any Quarter, FASL does not produce enough wafers within a Technology to meet the total orders for Product falling within such Technology issued by AMD and Fujitsu, FASL will allocate its wafer fabrication and assembly, test and package Production Volume for such Technology as follows:

(a) to AMD, **** of Production Volume for such Products for such Quarter;

(b) to Fujitsu, **** of Production Volume for such Products for such Quarter; and

(c) such **** of Production Volume for the relevant Technology to either AMD or Fujitsu or otherwise, as reasonably **** ( **** to the interests of either AMD or Fujitsu).

4.2.2 Adjustments Based on **** . In the event that **** is **** as set forth below, then, in determining **** for purposes of Section 4.2.1, the **** in Section 4.2.1(b) shall be **** :

(a) in the event **** is **** to or **** than **** and **** , the **** of Production Volume in Section 4.2.1(b) shall be **** to **** ;

(b) in the event **** is **** to or **** than **** and **** , the **** of Production Volume in Section 4.2.1(b) shall be **** ; and

(c) in the event **** is **** , the **** Production Volume in Section 4.2.1(b) shall be **** to **** .

4.2.3 Adjustments Based on **** . If (a) in any Quarter (for purposes hereof, “Q1”), FASL does not produce enough Product within a Technology to meet the total orders for Product falling within such Technology issued by AMD and Fujitsu, and (b) in the **** , AMD purchased Products falling within such Technology representing, as a **** , an amount **** in accordance with Sections 4.2.1 and 4.2.2 (unless such failure to purchase resulted from FASL’s inability to provide AMD with the **** ), then, in such event:

(a) For such Quarter (Q1), FASL will **** AMD its wafer fabrication and assembly, test and package Production Volume for such Technology, the ****

Production Volume for such Technology that is the **** of (i) the **** Production Volume for such Technology purchased by AMD **** , and (ii) the **** Production Volume for such Technology to which AMD is **** pursuant to Sections 4.2.1 and 4.2.2; and

(b) For the subsequent Quarter (for purposes hereof, “Q2”), **** that **** or that it forecasted it would purchase **** if such amount was lower, FASL will **** to AMD its wafer fabrication and assembly, test and package Production Volume for such Technology, the **** Production Volume for such Technology to which AMD is **** pursuant to Sections 4.2.1 and 4.2.2.

(c) If, however, **** for Q1 and **** for Q1, its **** for the **** be calculated as set forth in subsection (a) above. If AMD thereafter **** or that it forecasted, then for the subsequent Quarter **** , FASL will **** to AMD its wafer fabrication and assembly, test and package Production Volume for the applicable Technology, the **** Production Volume for such Technology to which AMD is entitled pursuant to Sections 4.2.1 and 4.2.2.

4.3 FASL Adjustments to Production Volume . Notwithstanding anything to the contrary in this Section 4, FASL shall use all commercially reasonable efforts to increase or reduce, as applicable, Production Volume to reflect AMD’s Forecasted Product Requirements and Fujitsu’s forecasted product requirements. FASL shall **** Production Volume **** , provided that FASL’s ability to so adjust Production Volume shall be subject to the guidelines with respect to inventory build up set forth in Section 8.8 of the LLC Operating Agreement.

4.4 Additional Capacity.

4.4.1 FASL Adding Capacity . In the event that FASL adds additional production capacity that is not contemplated by the **** Financial Support Plan, AMD, FASL and Fujitsu shall negotiate, in good faith, and agree as to how additional Production Volume generated therefrom shall be shared among the parties; provided, however , that in no event shall **** to **** such **** or **** with respect thereto.

4.4.2 Request for Additional Capacity from AMD . In the event (a) AMD requests that FASL add additional capacity not contemplated by the **** Financial Support Plan, (b) **** .

4.4.3 Request for Additional Capacity from Fujitsu . **** .

5. S UBSIDIARIES AND C HANNEL P ARTNERS

5.1 Right to Appoint Subsidiaries . FASL hereby grants to AMD the right during the Term to appoint any Subsidiary as a subdistributor or sales representative of AMD, provided that such appointment is on terms and conditions consistent with this Agreement, including that any such Subsidiary will abide by the inventory restrictions applicable to AMD pursuant to Section 2.3.3.

5.2 Right to Appoint Channel Partners . Subject to the terms and conditions of this Agreement, FASL hereby grants to AMD the right during the Term to appoint Channel Partners (through multiple tiers), provided that each Channel Partner enters into a distribution or sales representative agreement with AMD pursuant to which each such Channel Partner acknowledges that its rights to market, sell or otherwise distribute Products are no broader than, and are subject to at least the same limitations as, the rights granted by FASL to AMD in this Agreement. Consistent with the goals of Section 2.3.1, AMD will use its Best Efforts to select and retain Channel Partners that will effectively promote and accomplish the sale of Products, regardless of what other business AMD may carry on with such Channel Partners. In addition, as part of the quarterly business review described in Section 13, the Parties will discuss the performance of the Channel Partners and discuss possible ways to improve the mix of Channel Partners or improve the performance of existing Channel Partners.

5.3 Channel Management . With respect to its Channel Partners, AMD will:

5.3.1 use commercially reasonable efforts to enforce the terms and conditions of its agreements with its Channel Partners, including the sub-distributor obligations set forth in Schedule 5.3.1 ;

5.3.2 provide each Channel Partner with commercially reasonable field sales and field applications support, and with commercially reasonable assistance in connection with each such Channel Partner’s promotion and sale of Products; provided that AMD shall have no obligation to provide field applications support in the Fujitsu Territory;

5.3.3 use commercially reasonable efforts to ensure that each Channel Partner designated as a “stocking” Channel Partner by AMD (which designation shall be made by AMD in its sole discretion) maintains a representative minimum level of Product inventory in order to ensure timely off-the-shelf delivery of Products to Customers;

5.3.4 use commercially reasonable efforts to ensure that each Channel Partner complies with FASL’s distribution policies and procedures; and

5.3.5 use Best Efforts to ensure its Channel Partners have the ability to successfully promote Products in the regions in which they are actively pursuing Product sales.

5.4 Stock Rotations . AMD shall have the right to accept Product stock rotation returns from its Stocking Channel Partners in accordance with FASL’s **** stock rotation policies, provided that AMD shall not permit any Stocking Channel Partner to return **** Products held as inventory by such Stocking Channel Partner, based upon net shipments and in accordance with the time frames and procedures specified by FASL. FASL will notify AMD in advance of AMD’s placement of the applicable Purchase Orders of its stock rotation policies and agrees to provide AMD **** . If AMD accepts Product stock rotation returns from any Stocking Channel Partner, AMD shall promptly return such Products to FASL. AMD will, on a Quarterly basis, provide FASL with a written report regarding stock rotation returns by AMD to FASL, such written report identifying the Stocking Channel Partner that returned Products and specifying the Products returned (by Product number, and amount). On a Quarterly basis, FASL shall perform

an inspection and audit of the returned Products, and in the normal course of business **** . In order to pass inspection, all Products returned in accordance with this Section 5.4 must be in their original, unopened factory-sealed unit packaging containers and otherwise unaltered.

5.5 Termination of a Channel Partner . Upon termination of a Channel Partner relationship, AMD will promptly update Schedule 1.2.11 and, as applicable and if directed by FASL, **** . If so requested by FASL, AMD will **** to FASL at **** .

6. T RADEMARK L ICENSE AND R ESTRICTIONS ; M AINTENANCE ; D OCUMENTATION

6.1 License . Subject to the terms and conditions of this Agreement, FASL hereby grants to AMD a non-exclusive, royalty-free, fully paid up license (including the right to grant sublicenses), during the Term, to use and display the Trademarks in the AMD Territory and Joint Territory, and anywhere else in the world in connection with **** and AMD **** , in all cases solely in connection with the marketing, promotion, advertisement, sale and distribution of Products as expressly permitted herein, and in connection with AMD’s obligations set forth in Sections 5, 9 and 11. AMD shall not have the right to use the Trademarks to form combination marks with other trademarks, service marks, trade names, designs and logos.

6.2 No Additional Rights . AMD shall not use any other trademark or service mark confusingly similar to the Trademarks without the prior written approval of FASL. AMD understands and agrees that (a) as between the Parties, FASL is the sole owner of all right, title and interest in and to the Trademarks, (b) the use of any Trademark in connection with this Agreement shall not create in AMD any right, title or interest in or to the Trademarks, and (c) all such use and goodwill associated therewith shall inure solely to the benefit of FASL. AMD shall not challenge the validity of the Trademarks, nor shall AMD challenge or take any action inconsistent with FASL’s ownership of the Trademarks or the enforceability of FASL’s rights therein, unless the Trademark in question is used (without violation of FASL’s rights) or owned by AMD (whether or not such Trademark is registered in any particular jurisdiction) prior to FASL’s adoption or use of the Trademark, as demonstrated by AMD.

6.3 Registration . FASL shall retain the exclusive right to apply for and obtain registrations for the Trademarks throughout the world. AMD, upon FASL’s reasonable request, agrees to reasonably cooperate with FASL’s preparation and filing of any applications, renewals or other documentation necessary or useful to protect FASL’s Intellectual Property Rights in the Trademarks, including by providing FASL with brochures, manuals, advertisements and other materials concerning Products. Any cooperation that AMD provides in accordance with this Section 6.3 shall be at FASL’s sole cost, provided that such costs are reasonably incurred.

6.4 Quality Control. All use of the Trademarks shall be in accordance with the FASL trademark guidelines attached hereto as Exhibit 6.4 , as may be reasonably amended from time to time by FASL upon reasonable prior written notice to AMD (“ Guidelines ”), provided that the Guidelines shall apply to all distributors. AMD shall not use the Trademarks in any manner other than expressly authorized by this Agreement. From time to time upon FASL’s request, AMD shall submit to FASL samples of all AMD materials bearing the Trademarks. If FASL discovers any use of the Trademarks inconsistent with the Guidelines on any such submitted samples, and delivers to AMD a writing describing in reasonable detail the improper use, AMD shall promptly cease or remedy such use.

6.5 Documentation. Subject to the terms and conditions of this Agreement, FASL grants to AMD a non-exclusive, royalty-free, fully paid up license (including the right to grant sublicenses), during the Term, to use, display, translate, modify to make consistent with in its own documentation, copy and otherwise reproduce and distribute (either on its own, or in conjunction with, or as incorporated in AMD product documentation) the Documentation in the AMD Territory and the Joint Territory, and anywhere in the world in connection with **** and AMD **** , solely in connection with the marketing, promotion, advertisement, sale and other distribution of Products as expressly permitted herein, and in connection with AMD’s obligations set forth in Sections 5, 9 and 11. Notwithstanding the foregoing, AMD may not modify the Documentation in a manner that misrepresents the Products.

7. P RODUCT D ISTRIBUTION C ENTERS

7.1 Product Distribution Centers . AMD will set aside physical space reasonably acceptable to FASL in one of the storage or warehouse facilities it owns or leases in Europe for FASL to use as a storage and shipping facility for Products (the “Product Distribution Center”). The size of space allocated to FASL for the Product Distribution Center shall be agreed upon by the Parties in writing. To the extent feasible, AMD shall maintain the Product Distribution Center apart from the space allocated for AMD activities. The Product Distribution Center will be staffed by FASL employees or agents, or by FASL Subsidiary employees or agents, who shall be granted unlimited access to the Product Distribution Center, but who shall be under the general administrative supervision of AMD for site management at the applicable facility. Notwithstanding anything to the contrary in the foregoing, FASL and FASL Subsidiary employees and agents shall, and FASL or a FASL Subsidiary, as applicable, shall cause it employees and agents to: (a) not interfere with AMD’s activities at the AMD facilities housing the Product Distribution Center; (b) comply with AMD’s then-current workplace rules and procedures, as provided by AMD to FASL from time to time; and (c) take such other action or follow such other procedures as reasonably requested by AMD. FASL shall retain title and risk of loss with respect to Products stored in Product Distribution Center, and, as between the Parties, title and risk of loss shall pass to AMD only in accordance with Section 3.5.2. The Parties currently anticipate that it will not be possible to establish the Product Distribution Center on or before the Effective Date; the Parties will use Best Efforts to establish the Product Distribution Center as soon as possible after the Effective Date, but in any event will do so no later than January 1, 2004.

7.2 Product Distribution Center Operating Costs . AMD shall provide use of Product Distribution Center space at no cost to FASL, and AMD will bear all general maintenance costs and expenses incurred in connection with the Product Distribution Center, including, for example, rental payments, utilities, and security and safety expenses. Notwithstanding anything to the contrary in the foregoing, AMD shall not be responsible for any costs or expenses relating to FASL’s or the FASL Subsidiary’s operation of the Product Distribution Center, including costs relating to the FASL or FASL Subsidiary employees and/or agents working in the Product

Distribution Center, and administrative expenses incurred by FASL or a FASL Subsidiary in connection with maintaining and tracking Product inventory and packaging and shipping Products.

7.3 Consignment Warehouses . Upon the agreement of the Parties, and without limiting Section 2.3.4, AMD may maintain an agreed level of Product inventory in one or more of its consignment warehouses. Title and risk of loss with respect to such inventory shall remain with FASL until such time that AMD places a Purchase Order for the relevant Products in accordance with Section 3.1; provided, however , that with respect to Products maintained at AMD’s consignment warehouse in **** , title and risk of loss shall pass to AMD upon shipment of such Products from a FASL facility or the Product Distribution Center, and in accordance with Section 3.5. Any such inventory shall be maintained by AMD employees and at no cost to FASL. FASL will bear shipping costs for shipping Products to a consignment warehouse; AMD will bear shipping costs for shipping Products from a consignment warehouse. AMD will report on the amount and status of any such inventory from time-to-time as reasonably requested by FASL. Without limiting the foregoing, AMD agrees to use Best Efforts to provide FASL as soon as it may be practicable daily point-of-sales reports in a format and including the information reasonably designated by FASL regarding all such inventory on a consignment warehouse-by-consignment warehouse basis, providing the same types of information as specified in Schedule 7.3 . Payments for Products held by AMD in accordance with this Section 7.3 shall be made within sixty (60) days from the date of shipment of such Products to the applicable Customer or Channel Partner. An initial list of consignment warehouses is set forth in Schedule 7.3 ; AMD will update such list by reasonable form of notice to FASL if it adds a consignment warehouse location or ceases to use an existing location as a consignment warehouse.

8. V ENDOR M ANAGED I NVENTORY P ROGRAMS

The Parties may institute “vendor managed inventory programs,” operated through either Product Distribution Centers or via one or more third parties, on terms and conditions to be agreed in writing in advance by FASL and AMD.

9. C USTOMER S UPPORT R ESPONSIBILITIES

9.1 **** . AMD will maintain a **** in order to better enable AMD **** . AMD will provide FASL with **** , to better enable FASL **** . FASL shall have no right to use, and shall not use, any **** . Information obtained by FASL from AMD with regard to AMD’s independent sales activities, Product pricing or allocation decisions shall be subject to the obligations set forth in Section 16, and shall not be disclosed to Fujitsu or to any other Entity or person, except as otherwise expressly permitted hereunder.

9.2 Post-Sale Applications Support . AMD and FASL will provide reasonable field applications support to Customers that are designing in Products. Upon FASL’s reasonable request, AMD shall dedicate a reasonable number of FAEs to any region in the Joint Territory, on terms and conditions to be agreed in writing by the Parties, provided that AMD reasonably determines that substantial sales revenues for AMD may be generated from such region.

9.3 Warranty, Field Support . AMD will reasonably assist FASL and Customers in connection with FASL’s compliance with and fulfillment of its warranty policies and, specifically, with respect to the following FASL processes: Return Material Authorizations (RMAs); Customer Corrective Action Requests (CCARs); and Advanced Change Notifications (ACNs). **** written notification to AMD, and AMD will assist FASL in accordance with the revised processes, provided that **** would require AMD to incur significant additional costs or compliance burdens, unless AMD consents thereto in writing, such consent not to be unreasonably conditioned, delayed or withheld.

9.4 Subdistributor Channel Design Registration . AMD will assist FASL and Customers regarding Subdistribution Channel Design Registrations on terms and conditions, and in accordance with procedures, to be agreed by the Parties.

10. C HANGES IN S PECIFICATIONS AND D ESIGNS

10.1 Product Transition. FASL will initially manufacture the Products set forth on Schedule 10.1 in accordance with the specifications used for such Products immediately prior to the Effective Date, and will label and market such Products under the Product part numbers used for such Products by AMD immediately prior to the Effective Date, for a reasonable period of time as reasonably determined by FASL, taking into account various factors, including the preservation of Customer relationships and Customer demands and requirements.

10.2 Product Change or Elimination (End-of-Life) . With respect to any proposed change to the specifications or designs of any Product, or to a proposed change to cease further production of a Product, FASL shall notify AMD of the proposed change in accordance with

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