Exhibit 10.161
[***] DENOTES CONFIDENTIAL MATERIALS OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR
NAND Flash Supply
Agreement
Between Micron and
Apple
This NAND Flash Supply Agreement
(the “ Agreement
”) is entered into by and between Apple, a California
corporation doing business at 1 Infinite Loop, Cupertino,
California (“ Apple ”), and Micron
Technology, Inc., a Delaware corporation, doing business at 8000 S.
Federal Way, P.O. Box 6, Boise, Idaho 83707 (“
Micron ”) as of the Effective Date (as defined
below). Apple and Micron are sometimes individually referred to as
a “ Party ” and collectively as the
“ Parties ”.
Purpose
Apple is entering into this Agreement to enable
it to have a long term supply of NAND flash products from Micron,
and Micron is entering into this Agreement to enable it to supply
on a long term basis NAND flash products to Apple. This Agreement
sets forth the terms and conditions on which Micron will supply to
Apple, and Apple will purchase from Micron , NAND
flash products.
Agreement
In consideration of the mutual promises and
covenants set forth herein, the Parties agree as
follows:
1.
Venture
1.1
On or before October 31, 2005,
Micron intends to execute an agreement with Intel Corporation, a
Delaware corporation (“ Intel ”), to form
a Delaware limited liability company (the “
Manufacturer ”) to manufacture NAND flash
products. Intel and Micron will be the only members of the
Manufacturer. Micron will be a 51% owner of the Manufacturer and
51% of the Manufacturer’s wafer starts will be for NAND flash
products sold to Micron.
1.2
The chief executive officer of
Micron will recommend to the Board of Directors of Micron that the
formation of the Manufacturer be approved by the Board of Directors
on or before October 31, 2005.
2.
Term
2.1
Sections 1, 2.2, 9, 11 through 18
and this Section 2.1 of this Agreement will take effect when the
Agreement is executed by Micron and Apple.
2.2
The remaining provisions of this
Agreement will not take effect unless and until the closing of the
transaction to form the Manufacturer occurs (the “
Effective Date ”). If the closing of the
transaction to form the Manufacturer does not occur before [***],
the Parties agree to amend Exhibit A with respect to the Supply
Commitment
for each calendar quarter to reflect
the delay between the date of the beginning of the Supply
Commitment specified in Exhibit A and the actual closing date of
such transaction on a day for day basis. If the closing of the
transaction to form the Manufacturer does not occur by [***], Apple
may elect not to enter into the provisions of this Agreement that
are not effective under Section 2.1 by providing written notice to
Micron by [***]. If the closing of the transaction to form the
Manufacturer does not occur by [***], Micron may elect not to enter
into the provisions of this Agreement that are not effective under
Section 2.1 by providing written notice to Apple by [***]. In the
event that the closing of the transaction to form the Manufacturer
does not occur by [***], then the provisions of the Agreement that
are not effective under Section 2.1 shall not take effect and this
Agreement shall terminate. If the remaining provisions of this
Agreement become effective as provided in this Section 2.2, this
Agreement will expire on December 31, 2010, unless terminated
sooner in accordance with Sections 2.3 or 2.4 below or by written
agreement of the Parties.
2.3
Apple may terminate this Agreement
if: (i) Micron materially breaches this Agreement and fails to cure
such breach within 30 days after receipt of written notice from
Apple; or (ii) Micron or the Manufacturer files or has filed
against it a petition in bankruptcy, has a receiver appointed to
handle its assets or affairs, or makes or attempts to make an
assignment for the benefit of creditors, or is dissolved (other
than in connection with the acquisition of all of the capital stock
or substantially all of the assets of Micron).
2.4
Micron may terminate this Agreement
if: (i) Apple materially breaches this Agreement and fails to cure
such breach within 30 days after receipt of written notice from
Micron; or (ii) Apple files or has filed against it a petition in
bankruptcy, has a receiver appointed to handle its assets or
affairs, or makes or attempts to make an assignment for the benefit
of creditors, or is dissolved (other than in connection with the
acquisition of all of the capital stock or substantially all of the
assets of Apple).
2.5
The last sentence of Section 3.3,
and Sections 3.6, 7.3, 9, and 11 through 18 of this Agreement shall
survive termination or expiration of this Agreement. Section 3.4
will survive with respect to the last calendar quarter of the term
of the Agreement until the calculation is made with respect to such
quarter and Section 10 will survive for a period of two (2) years
after the termination or expiration date.
3.
Supply Commitment by
Micron
3.1
Micron agrees to supply to Apple the
number of gigabytes (“ GBs ”) identified
in Exhibit A as the supply commitment for each calendar quarter (as
may be adjusted under Sections 2 or 3 of Exhibit A), (the “
Supply Commitment ”). Micron will accept and
fulfill all P.O.s (as defined in Section 5.4) for Micron Products
(as defined in Exhibit D) placed by Apple in accordance with
Section 5.4, except to the extent the total GBs ordered for
delivery in a calendar quarter exceeds the Supply Commitment for
that calendar quarter. At least [***] ([***]) days prior to each
calendar quarter,
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Micron will provide to Apple written
notice of (i) the total number of GBs that Micron will make
available for sale to Apple during such quarter and (ii) the number
of GBs of each gigabit die density available for use in such Micron
Products during such quarter, consistent with the Density Road Map
(as defined in Section 8.1).
3.2
(a) If Micron reasonably
believes it will be unable to meet the Supply Commitment in any
calendar quarter during the term of this Agreement, Micron will
immediately notify Apple in writing of such shortage and the GBs it
will be able to supply to Apple if Micron takes the actions set
forth in Section 3.2(c) below.
(b) Within [***] ([***])
business days after receipt of such notification issued under
Section 3.2(a), Apple may [***].
(c) If Apple [***], Micron
will, to the extent necessary to meet such P.O.s: (i) direct the
Manufacturer to use Micron’s allocation of wafer starts, work
in process (if possible), and the resulting output from such wafer
starts to manufacture Micron Products; and (ii) make available for
sale to Apple finished Micron Products delivered to Micron or held
by the Manufacturer for Micron for such quarter, and any Micron
Products manufactured for Micron in previous quarters for later
delivery to Apple, up to [***].
3.3
If in any calendar quarter Micron
did not meet at least [***]% of the Supply Commitment for such
calendar quarter for any reason, and:
(a) Micron provided notice under
Section 3.2(a) and Apple reconfirmed existing P.O.s and/or placed
additional P.O.s for Micron Product, as required by Section 3.2(b),
that Micron was unable to fulfill in such quarter; or
(b) Micron provided notice under
Section 3.2(a), Apple reconfirmed existing P.O.s and/or placed
additional P.O.s for Micron Product, as required by Section 3.2(b),
and Apple provided written notice representing that it would have
placed P.O.s up to the Supply Commitment but did not due to the
notification it received from Micron under Section 3.2(a);
or
(c) Micron did not provide notice
under Section 3.2(a),
then Micron will promptly reimburse
the portion of the Pre-Payment equal to the sum of:
(i)
to the extent Apple is able to
purchase NAND flash products [***], the difference between (x)
[***] which it [***], in accordance with Section 5.4, for delivery
during such quarter (and to the extent [***]) and (y) [***];
and
(ii)
to the extent Apple is able to
purchase NAND flash products [***], the difference between (x)
[***], in accordance with Section 5.4, during such quarter (as
identified in the notice provided by Apple under Section 3.3(b)
above), and (y) [***]; and
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(iii)
to the extent (x) Apple is unable to
purchase NAND flash products [***], (y) Apple provides Micron
written notice representing that it actively contacted its other
suppliers and other third party suppliers of NAND flash products to
replace the Micron Products Apple placed P.O.s for, in accordance
with Section 5.4, for delivery during such quarter that Micron was
unable to fulfill during such quarter (or would have placed P.O.s
for, pursuant to Section 5.4, for delivery during such quarter as
identified in the notice provided by Apple under Section 3.3(b)
above), but NAND flash products were not available for sale from
such suppliers, and (z) [***]; and
(iv)
the product of (x) [***] GB and (y)
$[***] USD. For purposes of this Section 3.3(iv), “
Shortfall ” shall mean the difference between
the Supply Commitment for such quarter and the number of GBs of
Micron Products purchased by Apple during such quarter.
Notwithstanding anything herein to
the contrary, in the event Micron has paid to Apple all amounts of
the Pre-Payment (either as a reimbursement under Section 3 of this
Agreement or under Section 2 or 3 of Exhibit A, or as applied
against Apple purchases under Section 7.2), Micron shall have no
further liability under this Section 3.3.
3.4
If in any calendar quarter Micron
failed to meet the Supply Commitment for such quarter, but (A) had
GBs available which could have been supplied to Apple [***] (unless
otherwise permitted under additional purchase terms and conditions
specifically referencing this Agreement and signed by authorized
representatives of both parties) or (B) [***] (unless otherwise
permitted under additional purchase terms and conditions
specifically referencing this Agreement and signed by authorized
representatives of both parties), and if (i) the actual percentage
of GBs that Micron [***] to Apple was less than [***]% if such
calendar quarter was in [***], [***]% if in [***], or [***]% if in
[***], of Micron’s total GB output from the Manufacturer for
such quarter; (ii) the then current Supply Commitment is greater
than [***]% of the original Supply Commitment set forth in Exhibit
A, and (iii) Apple has placed P.O.s in accordance with Section 5.4
for Micron Products [***] pursuant to Section 3.1 (not to
exceed the Supply Commitment) and such P.O.s have not been
cancelled during the calendar quarter or re-scheduled for delivery
after the calendar quarter by Apple for any reason other than
failure to meet the conditions in Section 4.2 (such an occurrence
referred to as a “ Willful Failure to Supply
”), then Micron will promptly:
(a) pay Apple [***] above; provided,
however, that if the Willful Failure to Supply occurs in a calendar
quarter immediately after a calendar quarter in which Apple did not
meet the conditions set forth in Section 3.4(iii) above, the [***]
shall be as follows:
(i) in the event that
[***].
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(ii) in the event that it is
determined under Section 3.4(a)(i) [***] then nevertheless Micron
[***] under this Section 3.4 if the number of GB of Micron Products
purchased by Apple during the quarter in which the Willful Failure
to Supply occurs is greater than an amount equal to
(“[***]”): (1) the product of: [***] and (B) the
Supply Commitment for the quarter in which the Willful Failure to
Supply occurs; or (2) if there was a calculation under clause (1)
immediately above in the prior quarter, the product of [***], the
Supply Commitment for the most recent calendar quarter in which the
Willful Failure to Supply occurs and [***], provided such product
does not exceed the Supply Commitment for that quarter; or (3) if
there was a calculation under clause (2) immediately above in the
prior quarter, the product of the [***], the Supply Commitment for
the most recent calendar quarter in which the Willful Failure to
Supply occurs and [***], provided such product does not exceed the
Supply Commitment for that quarter. [***].
(iii) in the event that it is
determined under Section 3.4(a)(i) or (ii) [***] then the volume of
GB subject to [***] shall be equal to the difference between (A)
the lesser of (X) [***] and (Y) the number of GB of Micron Products
which Apple placed P.O.s for Micron Products in accordance with
Section 5.4 to be delivered during such quarter and (B) the number
of GB of Micron Products which Apple purchased during such quarter
(the “[***]”), Micron shall pay to Apple [***] under
this Section 3.4 an amount equal to, [***], the difference between
(1) [***] and (2) [***]. In each consecutive quarter thereafter in
which a Willful Failure to Supply occurs, the volume of GBs subject
to [***] shall be the product of [***], the Supply Commitment for
the most recent calendar quarter in which the Willful Failure to
Supply occurs and [***], but in no event shall the volume of GB
subject to the [***] in any given quarter exceed the Supply
Commitment for that quarter.
(b) if the aggregate amount to be
paid by Micron in accordance with subsection (a) exceeds a lifetime
cap of [***] US Dollars ($[***] USD) (“ [***]
” ), then, in addition to the amount of such cap,
Micron shall reimburse Apple all of remaining Pre-Payment as of the
date the cap is exceeded.
(c) the Parties agree that the [***]
plus the reimbursement of the remaining Pre-Payment as of the date
the [***] is exceeded, shall be the sole and exclusive remedy
available to Apple under this Section 3.4. Nothing provided in this
Section 3.4 will affect Micron’s obligations with respect to
the Supply Commitment for any calendar quarter.
3.5
Micron is not obligated to sell any
Micron Products in excess of the Supply Commitment to Apple either
on an annual or a quarterly basis under the terms and conditions of
this Agreement. Further, nothing in this Section 3 adjusts the
Supply Commitment.
3.6
The Parties agree [***].
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4.
Purchase Commitment by
Apple
4.1
Subject to Section 4.2 and 5.4
below, Apple agrees to purchase from Micron in each calendar
quarter the [***] (as defined below) for such calendar quarter
determined in accordance with [***] (the “Purchase
Commitment”) ; provided that the total amount in GBs
of the highest density of NAND flash die contained in the Micron
Products ordered pursuant to a P.O. for Micron Products (when
aggregated with the other P.O.s for such Micron Products for
delivery in such quarter) placed in accordance with Section 5.4
does not exceed the product of (i) the percentage set forth in the
Density Roadmap for such die density during such quarter; and (ii)
the Supply Commitment for such quarter. “[***]” means
the [***] of (i) [***] by Apple [***] during the [***]; and (ii)
[***] by Apple, or [***], from [***], during the [***], for [***].
For the last two quarters of 2007, and for the years 2008, 2009 and
2010, NAND flash products supplied by third parties will be
included when calculating [***] only if equivalent NAND flash
products are available for sale from Micron , and the
conditions set forth in Section 4.2 below are met with respect to
such NAND flash products.
4.2
Micron’s [***] and
Apple’s obligation to meet its Purchase Commitment for a
particular quarter are expressly conditioned upon: (i)
availability of Micron Products that are qualified for use in Apple
Products; provided that Apple does not unreasonably withhold
qualification; (ii) such Micron Products being available for
delivery in time to meet the delivery date requested in accordance
with the P.O. and forecast procedures; and (iii) conformance of
such Micron Products with mutually agreed upon specifications and
quality requirements.
If an Micron Product fails to meet
applicable qualification requirements after being qualified by
Apple, Apple will have no obligation to purchase such Micron
Product from Micron unless and until Apple has re-qualified such
Micron Product for use in Apple Products
