Exhibit 10.161
[***] DENOTES CONFIDENTIAL MATERIALS OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
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 [***] 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 [***] 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) [***] and (y)
[***]; and
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(ii) to the extent Apple is able to purchase NAND
flash products [***], the difference between (x) [***], and (y)
[***]; and
(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 [***], 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
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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
[***].
(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
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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.
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(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 [***].
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 [***] (as defined below) for such calendar quarter [***];
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. [***]. For the last two
quarters of [***], and for the years [***], 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
