AMENDED AND RESTATED FUJITSU DISTRIBUTION AGREEMENT

Exhibit 10.4

 

AMENDED AND RESTATED

FUJITSU DISTRIBUTION AGREEMENT

 

****Confidential treatment has been requested as to certain portions of this agreement. Such omitted confidential information has been designated by asterisks and has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended, and the Commission’s rules and regulations promulgated under the Freedom of Information Act, pursuant to a request for confidential treatment.****

Exhibit 10.4

 

AMENDED AND RESTATED

FUJITSU DISTRIBUTION AGREEMENT

 

THIS AMENDED AND RESTATED FUJITSU DISTRIBUTION AGREEMENT (this “ Agreement ”) is made and entered into as of December 21, 2005 (the “ Amendment Date ”), by and between Spansion Inc., a Delaware corporation (“ Spansion ”), and Fujitsu Limited, a Japanese corporation (“ Fujitsu ”). Spansion and Fujitsu are hereinafter also referred to as the “ Parties ” and individually as a “ Party .”

 

RECITALS

 

WHEREAS , Spansion designs, manufactures and markets Flash memory products;

 

WHEREAS, in connection with the formation of Spansion LLC, a Delaware limited liability company, Fujitsu and Spansion LLC entered into that certain Fujitsu Distribution Agreement, dated as of June 30, 2003 (the “ Effective Date ”), as amended, whereby Spansion LLC appointed Fujitsu as one of Spansion LLC’s initial distributors of Products (as defined below); and

 

WHEREAS, the Parties hereby desire to amend and restate that Distribution Agreement and to substitute Spansion for Spansion LLC as a party thereto;

 

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

 

AGREEMENT

 

1. DEFINITIONS; INTERPRETATION.

 

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

 

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

 

1.1.2 “ Affiliate ” of a Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with, such Person. The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. A Person shall be deemed an Affiliate of another Person only so long as such control relationship exists. The Parties acknowledge and agree that Fujitsu is not presently controlled by any Person. Notwithstanding the foregoing, (i) a Spansion Entity shall not be deemed to be an Affiliate of Fujitsu, except where expressly provided in this Agreement, and (ii) the term “Affiliate”

includes, solely with respect to Fujitsu and solely for purposes of this Agreement, Fujitsu Siemens Computers, but only for so long as Fujitsu maintains a thirty percent (30%) or greater ownership interest in Fujitsu Siemens Computers.

 

1.1.3 “ Aggregate Ownership Interest ” shall mean the quotient, expressed as a percentage, obtained by dividing (a) the aggregate number of shares of Common Stock of Spansion held by Fujitsu and its Affiliates, by (b) the aggregate number of outstanding shares, on an as converted to Common Stock basis, of Common Stock of Spansion. For purposes of this definition, the term “Common Stock” means, collectively, the Class A Common Stock, Class B Common Stock, Class C Common Stock and Class D Common Stock of Spansion.

 

1.1.4 “ AMD ” means Advanced Micro Devices, Inc., a Delaware corporation.

 

1.1.5 “ AMD Distribution Agreement ” means that AMD Distribution Agreement, dated as of June 30, 2003, as amended, by and between AMD and Spansion.

 

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

 

1.1.7 “ Applicable Law ” means, with respect to a Person, any domestic or foreign, national, federal, territorial, state or local constitution, statute, law (including principles of common law), treaty, ordinance, rule, administrative interpretation, regulation, order, writ, injunction, legally binding directive, judgment, decree or other requirement or restriction of any arbitrator or Governmental Authority applicable to such Person or any of its Affiliates or any of their respective properties, assets, officers, directors, employees, consultants or agents (in connection with such officer’s, director’s, employee’s, consultant’s or agent’s activities on behalf of such Person or any of its Affiliates).

 

1.1.8 “ 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.

 

1.1.9 “ Channel Partner ” means any Entity other than a Fujitsu Subsidiary who is appointed by Fujitsu as a sub-distributor or sales representative, pursuant to a written agreement between Fujitsu and such Entity in accordance with Section 5.2. A list of Channel Partners as of the Effective Date is set forth in Schedule 1.1.9 . Fujitsu will provide Spansion with an updated Schedule 1.1.9 or other reasonable form of notice from time to time whenever it appoints a new Channel Partner or terminates an existing Channel Partner.

 

1.1.10 “Claims” is defined in Section 19.

 

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

 

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

 

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

 

1.1.14 “ 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 10.1 below, but may still be made available to specific Customers, then it too shall be considered a Custom Product. Spansion will identify all Custom Products as such in Spansion’s then-current Quarterly price list or other reasonable form of communication to Fujitsu, including an end-of-life notice, if applicable.

 

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

 

1.1.16 “ 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 Spansion to Fujitsu hereunder, including marketing materials and brochures, manuals, published Product price lists and Product specifications, but expressly excluding documents that constitute Confidential Information of Spansion.

 

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

 

1.1.18 “ Europe ” means the countries and territories of Europe, as listed on Schedule 1.1.18 .

 

1.1.19 “ FAEs ” has the meaning set forth in Section 9.2.

 

1.1.20 “ FDI ” is defined in Section 2.3.4

 

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

 

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

 

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

 

1.1.24 “ Fujitsu **** ” means a Customer listed as such on Schedule 2.1 .

 

1.1.25 “ Fujitsu **** ” means the Customers set forth in Section A of Schedule 1.1.25 and such other Customers that are specified as Fujitsu **** in accordance with Section B of Schedule 1.1.25 .

 

1.1.26 “ Fujitsu Territory ” means Japan.

 

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

 

1.1.28 “ Governmental Authority ” means any foreign, domestic, national, federal, territorial, state or local governmental authority, quasi-governmental authority,

 

*	Confidential treatment has been requested pursuant to the Confidential Treatment Request dated December 21, 2005.

 

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instrumentality, court, government or self-regulatory organization, commission, tribunal or organization or any regulatory, administrative or other agency, or any political or other subdivision, department or branch of any of the foregoing.

 

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

 

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

 

1.1.31 “ 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).

 

1.1.32 “Joint Territory ” means anywhere in the world other than the Fujitsu Territory and the Spansion Territory.

 

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

 

1.1.34 “ Margin Split Agreement ” means the that Margin Split Agreement, dated as of June 30, 2003, by and among AMD, Fujitsu and FASL LLC.

 

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

 

1.1.36 “ Person ” means any person or entity, whether an individual, trustee, corporation, partnership, limited partnership, limited liability company, trust, unincorporated organization, business association, firm, joint venture, other legal entity or Governmental Authority.

 

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

 

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

 

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

 

1.1.40 “ Product ” means any finished product of Spansion.

 

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

 

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1.1.42 “ Purchase Price ” means the price per Product at which Spansion shall sell such Product to Fujitsu in accordance with Section 12.

 

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

 

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

 

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

 

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

 

1.1.47 “ Quarter ” means a Spansion fiscal quarter.

 

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

 

1.1.49 “ RSP ” has the meaning set forth in Section 12.2.

 

1.1.50 “ Spansion Account ” means a Customer listed as such on Schedule 2.1 .

 

1.1.51 “ Spansion Board ” means the Board of Directors of Spansion.

 

1.1.52 “ Spansion Content ” means components or products manufactured by Spansion or a Spansion 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 Spansion or a Spansion Subsidiary at Spansion’s or the Spansion Subsidiary’s direction and based on (a) technology or intellectual property owned by Spansion, or which Spansion otherwise has the right to use, or (b) designs provided by Spansion, which designs are proprietary to Spansion or a third party licensor of Spansion.

 

1.1.53 “ Spansion Content Only Product ” or “ SCO Product ” means any Product that contains only Spansion Content.

 

1.1.54 “ Spansion Entity ” means Spansion, or any of its directly or indirectly majority owned subsidiaries (whether organized as corporations, limited liability companies or other legal entity).

 

1.1.55 “ Spansion **** ” means the Customers set forth in Schedule 1.1.55 .

 

1.1.56 “ Spansion Territory ” means the Americas and Europe.

 

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

 

1.1.58 “Stocking Channel Partner” means a Channel Partner that is designated in writing as such by Fujitsu pursuant to Section 5.3.3, and that is subject to the deferred revenue recognition model referenced in Schedule 5.3.1 .

 

*	Confidential treatment has been requested pursuant to the Confidential Treatment Request dated December 21, 2005.

 

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1.1.59 “ Subsidiary ” of a Person means (a) any corporation, company or other legal entity (other than a partnership) in an unbroken chain of corporations, companies or other legal entities beginning with such Person, if each of the corporations, companies or entities other than the last corporation, company or entity in the unbroken chain then owns stock or other equity interests possessing more than fifty percent (50%) of the total combined voting power of all classes of stock or other equity interests in one of the other corporations, companies or other legal entities in such chain, (b) any partnership in which the Person is a general partner or (c) any partnership in which the Person possesses more than a fifty percent (50%) interest in the total capital or total income of such partnership.

 

1.1.60 “ Technology ” means each process technology used by Spansion in the production of Products. A list of Technologies as of the Effective Date is set forth in Schedule 1.1.60 Spansion will provide Fujitsu with an updated Schedule 1.1.60 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.

 

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

 

1.1.62 “ Trademarks ” means any trademarks, trade names, service marks and logos used by Spansion in connection with Products, including those marks, names and logos set forth in Schedule 1.1.62 attached hereto.

 

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

 

1.1.64 “ Wafer Output ” means a semiconductor wafer manufactured by or for Spansion for a specific Technology.

 

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

 

1.2 Interpretation .

 

1.2.1 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.”

 

1.2.2 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.

 

1.2.3 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.

 

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2. APPOINTMENT; GRANT OF RIGHTS

 

2.1 Grant of Distribution Rights .

 

2.1.1 Grant of Rights . Subject to the terms and conditions of this Agreement, Spansion grants to Fujitsu the right to market, sell and otherwise distribute Products during the Term (a) in the Fujitsu Territory and in the Joint Territory, (b) to Fujitsu Affiliates, Fujitsu Accounts and Global Accounts wherever located and (c) to Fujitsu PRC Customers in the PRC. No other grant of distribution rights to Fujitsu is implied by this Agreement. For the avoidance of doubt, Fujitsu’s rights granted hereunder exclude, among other things, the right to market, sell and otherwise distribute Products (a) in the Spansion Territory (except with respect to Fujitsu Accounts and certain Global Accounts identified in Schedule 2.1 ) or (b) to Spansion Accounts and Spansion PRC Customers.

 

2.1.2 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.

 

2.2 Sales and Appointment of Other Distributors by Spansion . Subject to Section 14 and for so long as Fujitsu maintains an Aggregate Ownership Interest of at least twelve and one-half percent (12.5%), Spansion shall not have the right to sell on its own or appoint any additional distributors or sales representatives, or grant any existing distributor or sales representative (other than Fujitsu) any additional rights, in the Fujitsu Territory (except with respect to Global Accounts, to which Spansion may sell Products except as designated in Schedule 2.1 ) or with respect to a Fujitsu Account, a Global Account so designated in Schedule 2.1 , or a Fujitsu PRC Customer, without Fujitsu’s prior written consent, which consent may be withheld in its sole discretion.

 

2.3 Fujitsu Obligations and Restrictions .

 

2.3.1 Best Efforts . Fujitsu shall use its Best Efforts to promote the sale of Products in the Fujitsu 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, Fujitsu shall have **** on behalf of Spansion with respect to Product availability.

 

2.3.3 Inventory . Fujitsu shall not, and shall cause its Subsidiaries not to, maintain an inventory of Products intended to be used for re-sale to Customers, except pursuant to vendor managed inventory programs instituted pursuant to Section 8 below, and provided that Fujitsu and any Fujitsu Subsidiary may maintain a limited, reasonable number of Products to use as Product samples in connection with demand creation activities in accordance with Section 11.6. The foregoing restrictions and obligations regarding inventory shall not apply to Channel Partners that take title to the Products from Fujitsu upon purchases or requisitions from Fujitsu.

 

2.3.4 FDI Additional Inventory . Notwithstanding anything to the contrary in the foregoing, Fujitsu Devices, Inc. (“FDI”) shall have the right, from and after the Effective Date, to hold up **** inventory of Product in its consignment warehouses, provided that FDI’s

 

*	Confidential treatment has been requested pursuant to the Confidential Treatment Request dated December 21, 2005.

 

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target level of Product inventory shall be **** inventory. From time to time, FDI may request the right to hold more than **** inventory to address special market opportunities and Spansion will not unreasonably withhold its consent to permit FDI to hold additional inventory to address those opportunities, taking into account existing firm purchase orders from Customers and FDI’s then-current good faith forecast for quick-turn business opportunities. Title and risk of loss with respect to such inventory shall remain with Spansion until it passes to Fujitsu as set forth in Section 3.5.2 and Section 7.3.1, as applicable. FDI will maintain any such inventory and will report on the amount and status of such inventory from time-to-time as reasonably requested by Spansion. The cost of maintaining any such inventory will be borne by Spansion on the same basis as if FDI were a consignment warehouse, in accordance with Section 7.3.2 below. Without limiting the foregoing, FDI agrees to use Best Efforts to provide Spansion as soon as it may be practicable daily point-of-sales reports in a format and including the information reasonably designated by Spansion 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 by FDI in accordance with this Section 2.3.4 shall be made within forty-five (45) days from the end of the month in which FDI ships such Products to a Customer or Channel Partner.

 

3. ORDERING; SHIPPING

 

3.1 Orders . Fujitsu will accept purchase orders for Products from Customers and Channel Partners, in accordance with its customary practices. To purchase Product(s) from Spansion, Fujitsu 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 Fujitsu 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 Fujitsu), 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 Order, even if such submissions may not be referred to specifically as “purchase orders” when transmitted. Fujitsu shall place each Purchase Order with Spansion sufficiently in advance of the delivery date to allow for Spansion’s Product delivery lead times, as set forth in Spansion’s most recent lead time report provided to Fujitsu. Spansion shall accept any Purchase Order submitted by Fujitsu to the extent that such Purchase Order (a) is within the Product allocation assured to Fujitsu 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 Fujitsu’s distribution rights hereunder. Spansion will not accept any order to purchase Products under this Agreement from any Entity or person other than Fujitsu without Fujitsu’s prior written consent. Notwithstanding the foregoing, with respect to Purchase Orders for Custom Products, Spansion shall not be required to accept such Purchase Orders, but Spansion 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. Spansion shall not withhold acceptance of any Purchase Order for Custom Products on a basis that provides Fujitsu less favorable treatment than any other Spansion distributor or sales representative submitting orders for similar quantities of the same or similar Custom

 

*	Confidential treatment has been requested pursuant to the Confidential Treatment Request dated December 21, 2005.

 

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Products; provided that any pre-existing commitments to any distributor may take precedence over any new commitments for Custom Products so long as Spansion makes such determinations on a commercially reasonable and non-discriminatory basis. Spansion shall notify Fujitsu as soon as possible if Spansion believes that a Purchase Order for either Standard Products or Custom Products does not meet the foregoing requirements for acceptance by Spansion. 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 . Fujitsu may cancel any Purchase Order or portion thereof for Standard Products, without charge, upon written notice to Spansion at least thirty (30) days prior to the applicable delivery date. Spansion 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 Fujitsu’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 Fujitsu, but the final determination will be Spansion’s.

 

3.3 Reschedules . Fujitsu may reschedule the delivery of any Purchase Order or portion thereof for Standard Products, without charge, one time only, upon notice to Spansion 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 Spansion. Any reschedules on less than thirty (30) days prior notice shall be subject to reschedule fees payable to Spansion in an amount set by Spansion in advance of Fujitsu’s placement of the applicable Purchase Order. Spansion will also determine reschedule policies, procedures and rights and charges with respect to Custom Products in advance of Fujitsu’s placement of the applicable Purchase Order. Spansion 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 Fujitsu, but the final determination will be Spansion’s.

 

3.4 Shipping . Spansion shall notify Fujitsu 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. Spansion shall deliver the ordered Product by the applicable delivery date(s), provided that Spansion may not deliver such Product earlier than the delivery date specified in the applicable Purchase Order. Upon a bona fide, reasonable, ****, Fujitsu may specify that Product shipments may not be late and if Spansion has agreed in advance for **** that a particular shipment—or shipments ****—will be subject to timeliness requirements, then in the event that any shipment is delayed and not timely, Fujitsu may direct Spansion to ship such Products by reasonable premium transportation designated by Fujitsu and Spansion shall bear the

 

*	Confidential treatment has been requested pursuant to the Confidential Treatment Request dated December 21, 2005.

 

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reasonable expense of any difference in cost due to such premium transportation. Spansion 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 Spansion Facility Directly to Customers or Stocking Channel Partners . Delivery of Products from any Spansion facility directly to Customers or Stocking Channel Partners shall be **** in accordance with INCOTERMS 2000, unless otherwise agreed in writing by the Parties, and title and risk of loss shall pass from Spansion to Fujitsu ****, 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 shall be **** in accordance with INCOTERMS 2000, unless otherwise agreed by the Parties, and title and risk of loss shall pass from Spansion to Fujitsu **** at **** at the ****, in accordance with **** , as interpreted in accordance with INCOTERMS 2000. It is understood and agreed that risk of loss shall reside with the Party that bore the risk of loss at the time the loss or damage occurred, in accordance with the preceding sentence, regardless of when the loss or damage is discovered. Without limiting the foregoing, Fujitsu will bear **** attributable to **** from the **** to **** or to a ****. Spansion will bear **** to ship Products directly from Spansion, a Spansion Subsidiary or a Spansion subcontractor facility to the Product Distribution Center, ****.

 

4. FORECASTS; PRODUCT ALLOCATIONS

 

4.1 Forecasts . Fujitsu working together with Spansion shall, on or before the end of the last week of the first month of each Quarter, provide Spansion with a non-binding forecast (a “ Forecast ”) setting forth Fujitsu’s projected Product needs for each of the five (5) Quarters following such Quarter (“ Forecasted Product Requirements ”). Each Forecast will be organized by Spansion on a Technology-by-Technology basis, and will contain a forecast for each Product within a particular Technology.

 

4.2 Short-Supply Guaranteed Allocation .

 

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

 

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

 

(b) such **** of Production Volume for the relevant Technology to Fujitsu or otherwise, as reasonably ****.

 

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(a) shall be ****:

 

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

 

*	Confidential treatment has been requested pursuant to the Confidential Treatment Request dated December 21, 2005.

 

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

 

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

 

4.2.3 Adjustments Based on **** . If (a) in any Quarter (for purposes hereof, “ Q1 ”), Spansion does not produce enough Product within a Technology to meet the total orders for Product falling within such Technology issued by Fujitsu, and (b) in the ****, Fujitsu 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 Spansion’s inability to provide Fujitsu with the ****, then, in such event:

 

(a) For such Quarter (Q1), Spansion will **** Fujitsu its wafer fabrication and assembly, test and package Production Volume for such Technology, the **** of Production Volume for such Technology that is the **** of (i) the **** of Production Volume for such Technology purchased by Fujitsu ****, and (ii) the **** of Production Volume for such Technology to which Fujitsu 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, Spansion will **** to Fujitsu its wafer fabrication and assembly, test and package Production Volume for such Technology, the **** Production Volume for such Technology to which Fujitsu 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 Fujitsu thereafter **** or that it forecasted, then for the subsequent Quarter ****, Spansion will **** to Fujitsu its wafer fabrication and assembly, test and package Production Volume for the applicable Technology, the **** Production Volume for such Technology to which Fujitsu is entitled pursuant to Sections 4.2.1 and 4.2.2.

 

4.3 Spansion Adjustments to Production Volume . Notwithstanding anything to the contrary in this Section 4, Spansion shall use all commercially reasonable efforts to increase or reduce, as applicable, Production Volume to reflect Fujitsu’s Forecasted Product Requirements. Spansion shall **** Production Volume ****.

 

5. SUBSIDIARIES AND CHANNEL PARTNERS

 

5.1 Right to Appoint Subsidiaries . Spansion hereby grants to Fujitsu the right during the Term to appoint any Subsidiary as a sub-distributor or sales representative of Fujitsu, provided that Fujitsu provides prior written notice to Spansion of any appointment, and such appointment is on terms and conditions consistent with this Agreement, including that any such Subsidiary will abide by the inventory restrictions applicable to Fujitsu pursuant to Section 2.3.3.

 

*	Confidential treatment has been requested pursuant to the Confidential Treatment Request dated December 21, 2005.

 

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5.2 Right to Appoint Channel Partners . Subject to the terms and conditions of this Agreement, Spansion hereby grants to Fujitsu the right during the Term to appoint Channel Partners (through multiple tiers), provided that Fujitsu provides prior written notice to Spansion of any appointment, and each Channel Partner enters into a distribution or sales representative agreement with Fujitsu 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 Spansion to Fujitsu in this Agreement. Consistent with the goals of Section 2.3.1, Fujitsu 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 Fujitsu 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, Fujitsu 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, however , that Fujitsu 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 Fujitsu (which designation shall be made by Fujitsu in its sole discretion upon written notice to Spansion) 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 Spansion’s distribution policies and procedures;

 

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; and

 

5.3.6 provide Spansion at least ninety (90) days prior written notice if Fujitsu wants to convert an existing Channel Partner from a deferred revenue recognition model to a buy/sell model, or from a buy/sell model to a deferred revenue recognition model, as referenced in Schedule 5.3.1 . The conversion will not be effective until the notice period has elapsed.

 

5.4 Stock Rotations . Fujitsu shall have the right to accept Product stock rotation returns from its Stocking Channel Partners in accordance with Spansion’s **** stock rotation policies, provided that Fujitsu shall not permit any Stocking Channel Partner to return **** of the Products held as inventory by such Stocking Channel Partner, based upon net shipments and in accordance with the time frames and procedures specified by Spansion. Spansion will notify Fujitsu in advance of Fujitsu’s placement of the applicable Purchase Orders of its stock rotation

 

*	Confidential treatment has been requested pursuant to the Confidential Treatment Request dated December 21, 2005.

 

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policies and agrees to provide Fujitsu ****. If Fujitsu accepts Product stock rotation returns from any Stocking Channel Partner, Fujitsu shall promptly return such Products to Spansion. Fujitsu will, on a Quarterly basis, provide Spansion with a written report regarding stock rotation returns by Fujitsu to Spansion, 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, Spansion 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 . Fujitsu shall have the right during the Term to terminate one or more Channel Partners, provided that Fujitsu provides prior written notice to Spansion of any termination. Upon termination of a Channel Partner relationship, Fujitsu will promptly update Schedule 1.1.9 and, as applicable and if directed by Spansion, ****. If so requested by Spansion, Fujitsu will **** to Spansion at the ****.

 

6. TRADEMARK LICENSE AND RESTRICTIONS; MAINTENANCE; DOCUMENTATION

 

6.1 License . Subject to the terms and conditions of this Agreement, Spansion hereby grants to Fujitsu 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 Fujitsu Territory and Joint Territory, and anywhere else in the world in connection with ****, in all cases solely in connection with the marketing, promotion, advertisement, sale and distribution of Products as expressly permitted herein, and in connection with Fujitsu’s obligations set forth in Sections 5, 9 and 11 Fujitsu 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 . Fujitsu shall not use any other trademark or service mark confusingly similar to the Trademarks without the prior written approval of Spansion. Fujitsu understands and agrees that (a) as between the Parties, Spansion 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 Fujitsu 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 Spansion. Fujitsu shall not challenge the validity of the Trademarks, nor shall Fujitsu challenge or take any action inconsistent with Spansion’s ownership of the Trademarks or the enforceability of Spansion’s rights therein, unless the Trademark in question is used (without violation of Spansion’s rights) or owned by Fujitsu (whether or not such Trademark is registered in any particular jurisdiction) prior to Spansion’s adoption or use of the Trademark, as demonstrated by Fujitsu.

 

6.3 Registration . Spansion shall retain the exclusive right to apply for and obtain registrations for the Trademarks throughout the world. Fujitsu, upon Spansion’s reasonable request, agrees to reasonably cooperate with Spansion’s preparation and filing of any applications, renewals or other documentation necessary or useful to protect Spansion’s Intellectual Property Rights in the Trademarks, including by providing Spansion with brochures, manuals, advertisements and other materials concerning Products. Any cooperation that Fujitsu

 

*	Confidential treatment has been requested pursuant to the Confidential Treatment Request dated December 21, 2005.

 

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provides in accordance with this Section 6.3 shall be at Spansion’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 Spansion trademark guidelines attached hereto as Exhibit 6.4 , as may be reasonably amended from time to time by Spansion upon reasonable prior written notice to Fujitsu (“ Guidelines ”), provided that the Guidelines shall apply to all distributors. Fujitsu shall not use the Trademarks in any manner other than expressly authorized by this Agreement. From time to time upon Spansion’s request, Fujitsu shall submit to Spansion samples of all Fujitsu materials bearing the Trademarks. If Spansion discovers any use of the Trademarks inconsistent with the Guidelines on any such submitted samples, and delivers to Fujitsu a writing describing in reasonable detail the improper use, Fujitsu shall promptly cease or remedy such use.

 

6.5 Documentation . Subject to the terms and conditions of this Agreement, Spansion grants to Fujitsu 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 Fujitsu product documentation) the Documentation in the Fujitsu Territory and the Joint Territory, and anywhere in the world in connection with ****, solely in connection with the marketing, promotion, advertisement, sale and other distribution of Products as expressly permitted herein, and in connection with Fujitsu’s obligations set forth in Sections 5, 9 and 11. Notwithstanding the foregoing, Fujitsu may not modify the Documentation in a manner that misrepresents the Products.

 

7. PRODUCT DISTRIBUTION CENTERS

 

7.1 Product Distribution Centers . Fujitsu will set aside physical space reasonably acceptable to Spansion in one of the storage or warehouse facilities it owns or leases in Japan for Spansion to use as a storage and shipping facility for Products (the “ Product Distribution Center ”). The size of space allocated to Spansion for the Product Distribution Center shall be agreed upon by the Parties in writing. To the extent feasible, Fujitsu shall maintain the Product Distribution Center apart from the space allocated for Fujitsu activities. The Product Distribution Center will be staffed by Fujitsu employees or agents, or by Fujitsu 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 Fujitsu for site management at the applicable facility. Notwithstanding anything to the contrary in the foregoing, Spansion shall cause its employees and agents, and shall cause each Spansion Subsidiary to cause its employees and agents to: (a) not interfere with Fujitsu’s activities at the Fujitsu facilities housing the Product Distribution Center; (b) when located at the Product Distribution Center, comply with Fujitsu’s then-current workplace rules and procedures, as provided by Fujitsu to Spansion from time to time; and (c) when located at the Product Distribution Center, take such other action or follow such other procedures as reasonably requested by Fujitsu. Spansion 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 Fujitsu only in accordance with Section 3.5.2.

 

7.2 Product Distribution Center Operating Costs . Fujitsu shall provide use of Product Distribution Center space to Spansion, and Fujitsu will bear all general maintenance

 

*	Confidential treatment has been requested pursuant to the Confidential Treatment Request dated December 21, 2005.

 

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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: (i) Fujitsu shall not be responsible for any costs or expenses reasonably relating to Spansion’s or any Spansion Subsidiary’s use of the Product Distribution Center, including costs reasonably relating to any Spansion or Spansion Subsidiary employees or agents and any administrative expenses incurred by Spansion or any Spansion Subsidiary in connection with maintaining and tracking Product inventory and packaging and shipping Products; and (ii) Spansion will bear the portion of the operational and administrative overhead costs of the Product Distribution Center equal to the portion of the Product Distribution Center used for storage and shipping of Products and Spansion or Spansion Subsidiary activities related thereto, as currently being paid by Spansion as of the effective date of the amendment to the Agreement. Administrative overhead costs borne by Spansion will include costs associated with the applicable sales, booking and inventory systems, as currently being paid by Spansion as of the effective date of the amendment to the Agreement. Spansion shall reimburse Fujitsu for the costs described in clause (ii) of the second preceding sentence within forty-five (45) days of receipt of Fujitsu’s invoice therefor. With each invoice, Fujitsu will provide documentation reasonably sufficient to justify the charges allocable to Spansion. Fujitsu agrees to provide reasonable advance written notice of not less than sixty (60) days of any proposed material increases in the costs to be allocated to Spansion hereunder so that Spansion may decide whether to accept such allocation or obtain alternative facilities. If Spansion determines that it will be more cost-effective to maintain its own Product Distribution Centers independently, Spansion may elect not to continue to use space at Fujitsu facilities upon one hundred twenty (120) days’ prior written notice to Fujitsu. If Spansion provides Fujitsu notice during the sixty (60) day notice period of an intention to vacate the facility, then Fujitsu will not invoice Spansion for the incremental fees associated with the price increase and Spansion will not be required to pay such fees.

 

7.3 Consignment Warehouses .

 

7.3.1 General . Upon the agreement of the Parties, and without limiting Section 2.3.4, Fujitsu may maintain an agreed level of Product inventory in one or more of its or its Subsidiaries’ consignment warehouses. Title and risk of loss with respect to such inventory shall remain with Spansion until such time that the relevant Products are shipped from the consignment warehouses. An initial list of consignment warehouses is set forth in Schedule 7.3 ; Fujitsu will update such list by reasonable form of notice to Spansion if it adds a consignment warehouse location or ceases to use an existing location as a consignment warehouse.

 

7.3.2 Costs; Replacement . Spansion will bear the portion of the operational and administrative overhead costs for the foregoing consignment warehouses equal to the respective portions of the consignment warehouses used for maintenance of Product inventory, as currently being paid by Spansion as of the effective date of the amendment to the Agreement. Administrative overhead costs borne by Spansion will include costs associated with the applicable sales, booking and inventory systems, as currently being paid by Spansion as of the effective date of the amendment to the Agreement. Spansion shall reimburse Fujitsu for the foregoing costs within forty-five (45) days of receipt of Fujitsu’s invoice therefor. With each invoice, Fujitsu will provide documentation reasonably sufficient to justify the charges allocable

 

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to Spansion. Operational costs borne by Spansion will exclude any costs associated with storage space or operations used by Fujitsu, FDI or any Fujitsu Affiliates for any non-Spansion Products. Spansion will bear shipping costs for shipping Spansion Products to each consignment warehouse prior to shipment to the applicable Customer or Channel Partner; Fujitsu will bear shipping costs for shipping Products from a consignment warehouse to the applicable Customer or Channel Partner, pursuant to the terms set forth in this Agreement. Fujitsu agrees to provide reasonable advance written notice of not less than sixty (60) days of any proposed material increases in the costs to be allocated to Spansion hereunder so that Spansion may decide whether to accept such allocation or obtain alternative facilities. If Spansion provides Fujitsu notice during the sixty (60) day notice period of an intention to vacate the facility, then Fujitsu will not invoice Spansion for the incremental fees associated with the price increase and Spansion will not be required to pay such fees. Spansion shall have the right to replace at any time a consignment warehouse at a Fujitsu site with a non-Fujitsu facility upon one hundred twenty (120) days’ prior written notice to Fujitsu. In the event of such replacement, Fujitsu shall not bear any of the operational or administrative maintenance costs associated with such non-Fujitsu facility.

 

7.3.3 Inventory Reporting; Payments . Fujitsu will report on the amount and status of any consignment warehouse inventory from time-to-time as reasonably requested by Spansion. Without limiting the foregoing, Fujitsu agrees to use Best Efforts to provide Spansion as soon as it may be practicable daily point-of-sales reports in a format and including the information reasonably designated by Spansion regarding all such inventory on a consignment warehouse-by-consignment warehouse basis, providing the same types of information as specified in Schedule 2.3.4 . Payments for Products held by Fujitsu in accordance with this Section 7.3 shall be made within forty-five (45) days from the end of the month in which such Products are shipped to the applicable Customer or Channel Partner.

 

7.4 Audit and Inspection by Spansion. Upon Spansion’s reasonable request from time to time, Spansion shall have the right to perform a reasonable audit and inspection of the Product Distribution Center and consignment warehouses maintained by Fujitsu and/or its Subsidiaries, as well as the books and records relating to the costs and expenses incurred by the Product Distribution Center or consignment warehouses, in each case as necessary to verify (i) the amount and condition of Product inventory, and (ii) the costs and expenses borne by Spansion regarding the Product Distribution Center and any Consignment Warehouse. Any such audit and inspection shall be conducted so as: (a) not to interfere with Fujitsu’s activities at the relevant facility; (b) comply with Fujitsu’s then current workplace rules and procedures, as provided by Fujitsu to Spansion from time to time; and (c) to comply with such other procedures as reasonably requested by Fujitsu.

 

8. VENDOR MANAGED INVENTORY PROGRAMS

 

Fujitsu and any Fujitsu Subsidiary 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 Spansion and Fujitsu. For purposes hereof, a vendor managed inventory program is a logistics program where a supplier stocks inventory at either a third party or customer location based on a customer build forecast. The customer does

 

16

not own the inventory and is only billed once the inventory is used. The amount of inventory and other terms and conditions are based on an initially negotiated contract.

 

9. CUSTOMER SUPPORT RESPONSIBILITIES

 

9.1 **** . Fujitsu will maintain a **** in order to better enable Fujitsu ****. Fujitsu will provide Spansion with ****, to better enable Spansion ****. Spansion shall have no right to use, and shall not use, any ****. In the event Fujitsu has an obligation to a Customer not to disclose such information to Spansion, Fujitsu will use reasonable efforts to seek permission from such Customer to disclose such information to Spansion for the purposes set forth under this Section 9.1. Information obtained by Spansion from Fujitsu with regard to Fujitsu’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 any other Entity or person, except as otherwise expressly permitted hereunder.

 

9.2 Post-Sale Applications Support . Fujitsu and Spansion will provide reasonable field applications support to Customers that are designing in Products; provided, however , that Fujitsu shall have no obligation to provide any field applications engineers (“FAEs”) in the Fujitsu Territory. Upon Spansion’s reasonable request, Fujitsu 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 Fujitsu reasonably determines that substantial sales revenues for Fujitsu may be generated from such region.

 

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

 

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