Exhibit 10.163
[***] DENOTES CONFIDENTIAL
MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
INTEL/MICRON
CONFIDENTIAL
SUPPLY AGREEMENT
This SUPPLY AGREEMENT (the
“Agreement ”), is made and entered into as of
this 6 th day of January, 2006 (the “Effective
Date” ), by and between Intel Corporation, a Delaware
corporation ( “Intel” ), and IM Flash
Technologies, LLC, a Delaware limited liability company (the
“Joint Venture Company” ).
RECITALS
A.
The Joint Venture Company is engaged
in the manufacturing, assembly and test of NAND Flash Memory
Products (as defined hereinafter) for Intel.
B.
Intel and the Joint Venture Company
(each, a “Party” and collectively, the
“Parties” ) desire the Joint Venture Company to
supply Products, including Secondary Silicon, for Intel in
accordance with Intel’s Sharing Interest upon the terms and
subject to the conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties intending to be legally bound do
hereby agree as follows.
ARTICLE 1
DEFINITIONS; CERTAIN INTERPRETIVE
MATTERS
1.1
Definitions
. In addition to the terms
defined elsewhere in this Agreement, capitalized terms used in this
Agreement shall have the respective meanings set forth in
Exhibit A .
1.2
Certain Interpretive
Matters .
(a)
Unless the context requires
otherwise, (1) all references to Sections, Articles, Exhibits,
Appendices or Schedules are to Sections, Articles, Exhibits,
Appendices or Schedules of or to this Agreement, (2) each of
the Schedules will apply only to the corresponding Section or
subsection of this Agreement, (3) each accounting term not
otherwise defined in this Agreement has the meaning commonly
applied to it in accordance with Modified GAAP, (4) words in
the singular include the plural and visa versa, (5) the term
“ including ” means “ including without
limitation ,” and (6) the terms “
herein ,” “ hereof ,” “
hereunder ” and words of similar import shall mean
references to this Agreement as a whole and not to any individual
Section or portion hereof. All references to $ or dollar amounts
will be to lawful currency of the United States of America. All
references to “ day ” or “ days
” will mean calendar days and all references to
“quarter(ly)”, “month(ly)” or
“year(ly)” will mean Fiscal Quarter, Fiscal Month or
Fiscal Year, respectively.
(b)
No provision of this Agreement will
be interpreted in favor of, or against, any of the Parties by
reason of the extent to which any such Party or its counsel
participated in the drafting
thereof or by reason of the extent
to which any such provision is inconsistent with any prior draft of
this Agreement or such provision.
ARTICLE 2
OBLIGATIONS OF THE JOINT
VENTURE COMPANY;
PROCESSES AND
CONTROLS
2.1
General Obligations
. The Joint Venture Company will (1)
supply Product to Intel in accordance with the purchasing process
set forth in Article 4 hereof; (2) develop its Facilities
and operations to meet Capacity according to the Ramp Plan and the
Initial Business Plan, as may be amended thereafter, and the
Operating Plan and the obligations set forth herein, including
Sections 2.2, 2.5 and 2.9 ; (3) supply Products which meet
the Specification(s), Price, Yield, Cycle-Time, and Quality and
Reliability as agreed by the Parties; and (4) operate its
Facilities so that Product output from any one Facility matches the
other Facilities in form, fit and function, in accordance with
Section 2.14 .
2.2
Products to Supply
. The Joint Venture Company
will manufacture, assemble and test Products for Intel in
accordance with the Operating Plan and applicable Specifications,
developed in response to Intel’s Demand Forecast provided to
Joint Venture Company in accordance with Article 3
below.
2.3
Process and Design
Information . Intel
agrees to provide to the Joint Venture Company: (i) such process
technology or information as is required to be disclosed under the
Joint Development Program Agreement and the Technology License
Agreement; and (ii) design information reasonably required to
manufacture NAND Flash Memory Wafers.
2.4
Control; Processes
. The Joint Venture Company and
Intel will review Joint Venture Company’s control and process
mechanisms, including but not limited to such mechanisms that are
utilized to ensure that all parameters of the Specification,
including the Performance Criteria, are met or exceeded in the
Joint Venture Company’s manufacture of Products by either the
Joint Venture Company or its approved subcontractor for
Intel. The Parties agree to work together in good faith to
define mutually agreeable control and process mechanisms including
the following: [***].
2.5
Equipment, Systems,
Materials . Except
as provided in other Joint Venture Documents, the Joint Venture
Company shall be responsible for procuring all manufacturing
equipment, tools, automated material handling systems therein and
materials, including Prime Wafers, which are reasonably required
for the Joint Venture Company to achieve the Ramp Plan and the
Operating Plan. The Joint Venture Company shall endeavor to
manage the entire supply chain, including equipment, materials,
systems, maintenance and subcontractors and vendors, to create
efficiency and maximize the Performance Criteria.
2.6
Production Masks
. Unless otherwise agreed with
Intel, the Joint Venture Company or its subcontractors will be
responsible to obtain, maintain, repair and replace masks used in
the production of Products. Such masks will only be used in
the production of Products for Intel. Production masks will
be repaired and replaced solely at mask operations which have been
approved by Intel, which approval shall not be unreasonably
withheld. [***].
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2.7
Designation of WIP
. [***].
2.8
Subcontractors
. The Joint Venture Company
may utilize subcontractors to perform any portion of the
manufacture, assembly and test process in making Products for
Intel, subject to all subcontractors being approved by the Members,
which approval shall not be unreasonably withheld. The
Joint Venture Company will ensure that all contracts with
subcontractors will provide the Joint Venture Company with the same
level of access and controls as set forth in the Agreement,
including Sections 2.4, 2.9, 2.10, 2.11, 2.12 and Article 5
.
2.9
Staffing . The Joint Venture Company shall
adequately staff its Facilities and ensure that its subcontractors
adequately staff their facilities to sustain and manage production
of Product for Intel, including the obligations set forth in
Section 2.1 and meeting scheduled commitments, including the
Ramp Plan, the Operating Plan and the Performance
Criteria.
2.10
Business Continuity
Plan. The Joint
Venture Company will develop a process to recover the production
process in the event of a natural disaster or any other event that
disrupts the production process or the ability of the Joint Venture
Company to meet its delivery commitments to Intel or satisfy
customer orders. If requested by Intel, Joint Venture Company
will review its Business Continuity Plan with Intel and make
changes as agreed with Intel, subject to any confidentiality
requirements.
2.11
[***] . In addition to the quarterly review and
monthly report requirements set forth in Section 3.2 and 3.3
, the Joint Venture Company will promptly notify Intel of
[***].
2.12
Traceability and Data
Retention . Intel and the
Joint Venture Company shall review the Joint Venture
Company’s process traceability system [***]. The Joint
Venture Company agrees to maintain such data for a minimum of [***]
years. The Joint Venture Company will endeavor to provide
Intel [***].
2.13
Additional Customer
Requirements .
Intel will inform the Joint Venture Company in writing of any
auditable supplier requirements of Intel’s customer relating
to any Facility at which Product is manufactured, assembled or
tested. The Parties will work together in good faith to
resolve such requests.
2.14
Transfer; Equivalency of
Operations .
[***].
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ARTICLE 3
PLANNING MEETINGS AND
FORECASTS;
PERFORMANCE REVIEWS AND
REPORTS
3.1
Planning and
Forecasting .
(a)
Intel will quarterly provide the
Joint Venture Company, in a timeframe to be mutually agreed by the
Parties to meet customer expectations, with a written demand
forecast for [***] ([***]) quarters corresponding to the Joint
Venture Company’s Fiscal Quarters or as may be otherwise
agreed between the Parties. This demand will include desired
finished product breakout by design id, technology node, wafer as
finished goods or package type ( “Demand
Forecast” );
(b)
The Joint Venture Company shall
furnish Intel with a written response within [***] ([***]) Business
Days indicating a response regarding capacity and what portion of
the demand that the Joint Venture Company can commit to meet.
This written response (the “Planning Forecast” )
will include:
[***].
(c)
Based on the Planning Forecast, the
Joint Venture Company shall develop a [***] ([***]) Fiscal Quarter
proposed Product loading plan for such period ( “Proposed
Loading Plan” ). The Joint Venture Company shall provide
Intel with the Proposed Loading Plan at least [***] ([***])
Business Days prior to its review by the Manufacturing
Committee.
(d)
The Joint Venture Company will
submit the Proposed Loading Plan, Planning Forecast and other
requested information to the Manufacturing Committee for
endorsement. Once endorsed by the Manufacturing Committee,
the Proposed Loading Plan shall become part of the Operating
Plan.
3.2
Performance
Reviews and Reports . The Joint Venture
Company shall meet with Intel each quarter to discuss the
Performance Criteria and the most recent monthly
report. The monthly report will be distributed to Intel
monthly, on a date to be agreed by the Parties, and will include
the following information:
(a)
Describes [***];
(b)
Describes [***];
(c)
Describes [***];
4
(d)
Describes [***].
(e)
Identifies [***].
3.3
Monthly
Review . In addition, the
Parties shall hold a monthly meeting, on a date to be agreed by the
Parties, with the primary purpose of [***].
ARTICLE 4
PURCHASE AND SALE OF
PRODUCTS
4.1
Product Quantity
. Intel shall purchase from the
Joint Venture Company a percentage, equal to Intel’s Sharing
Interest (as the same may change from time to time), of all of the
Joint Venture Company’s output of Products that meet the
Specifications. The Joint Venture Company shall produce all
Products in accordance with the Operating Plan, developed in
response to Intel’s Demand Forecast under Article 3
above. If Intel fails purchase its full Sharing
Interest of the Joint Venture Company’s output, produced in
accordance with the Operating Plan ( “ Underloading
” ), then the increased Prices associated with such
Underloading shall be isolated and charged solely to Intel, which
Intel shall remain solely responsible for paying.
Notwithstanding the foregoing, Intel may elect, but is not
obligated, to purchase Product in excess of its Sharing Interest
only by mutual agreement of the other Member.
4.2
Secondary Silicon
. Any Secondary Silicon produced by
the Joint Venture Company or its subcontractors will be provided
[***] by the Joint Venture Company to the Members in a percentage
equal to Intel’s Sharing Interest (as the same may change
from time to time). ALL SECONDARY SILICON PROVIDED HEREUNDER
IS PROVIDED “AS IS,” “WHERE IS” WITH
ALL FAULTS AND DEFECTS BASIS WITHOUT WARRANTY OF ANY
KIND.
4.3
Placement of Purchase
Orders . Prior to the
commencement of every Fiscal Quarter or another time period agreed
by the Parties in conjunction with the planning cycle specified in
Article 3 , the Joint Venture Company shall place a
non-cancelable blanket purchase order in writing (via e-mail or
facsimile transmission) for the quantity of Product to be supplied
by the Joint Venture Company in the following Fiscal Quarter as
indicated in the Operating Plan (each such order, a “
Purchase Order ” ). Intel may issue
change orders to such Purchase Orders to reflect changes in the
Operating Plan, provided that such changes can be reasonably
accommodated by the Joint Venture Company without disrupting
on-going manufacturing operations. Intel may also elect to
place out-of-cycle purchase order of Product, including expedited
Probed Wafers, to the Joint Venture Company on an as-needed
basis. The terms and conditions of this Agreement supersede
the terms and conditions contained in either Party’s sales or
purchase documentation provided in connection herewith unless
expressly agreed otherwise in a writing signed by each
Party.
4.4
Shortfall . The Joint Venture Company shall
immediately notify Intel in writing of any inability to meet a
Purchase Order commitment to Intel.
5
4.5
Acceptance of Purchase
Order . Each Purchase
Order that corresponds to the Operating Plan in the manner
contemplated by Section 4.3 and, and is otherwise free of
errors, shall be deemed accepted by the Joint Venture Company upon
receipt and shall be binding on the Parties, to the extent not
inconsistent with the Operating Plan.
4.6
Content of Purchase
Orders . Each Purchase
Order shall specify the following items:
(a)
Purchase Order number;
(b)
Description and part number of each
Product;
(c)
Forecasted quantity of each
different Product and the Sharing Interest portion thereof for the
calendar month;
(d)
Forecasted unit Price and total
forecasted Price for each different Product, and total forecasted
Price for all Products ordered;
(e)
Level of Probe Testing;
(f)
Marking specification and packaging
requirements;
(g)
Requested delivery date;
(h)
Place of delivery; and
(i)
Other terms (if any).
4.7 Taxes .
(a)
General. All sales, use and
other transfer taxes imposed directly on or solely as a result of
the supplying of Products and the payments therefor provided herein
shall be stated separately on the Joint Venture Company’s
invoice, collected from Intel and shall be remitted by the Joint
Venture Company to the appropriate tax authority (“
Recoverable Taxes ”), unless Intel provides valid
proof of tax exemption prior to the effective date of the transfer
of the Products or otherwise as permitted by law prior to the time
the Joint Venture Company is required to pay such taxes to the
appropriate tax authority. When property is delivered and/or
services are provided or the benefit of services occurs within
jurisdictions in which collection and remittance of taxes by Intel
is required by law, the Joint Venture Company shall have sole
responsibility for payment of said taxes to the appropriate tax
authorities. In the event such taxes are Recoverable Taxes and the
Joint Venture Company does not collect tax from Intel or pay such
taxes to the appropriate governmental entity on a timely basis, and
is subsequently audited by any tax authority, liability of Intel
will be limited to the tax assessment for such Recoverable Taxes,
with no reimbursement for penalty or interest charges or other
amounts incurred in connection therewith. Notwithstanding anything
herein to the contrary, taxes other than Recoverable Taxes shall
not be reimbursed by Intel, and each Party is responsible for its
own respective income taxes (including franchise and other taxes
based on net income or a variation thereof), taxes based upon gross
revenues or receipts, and taxes with respect to general overhead,
including but not limited to business and occupation taxes, and
such taxes shall not be Recoverable Taxes.
(b)
Withholding Taxes. In the
event that Intel is prohibited by law from making payments to the
Joint Venture Company unless Intel deducts or withholds taxes
therefrom and remits such taxes to the local taxing jurisdiction,
then Intel shall duly withhold and remit such taxes and
shall
6
pay to the Joint Venture Company the
remaining net amount after the taxes have been withheld. Such
taxes shall not be Recoverable Taxes and Intel shall not reimburse
the Joint Venture Company for the amount of such taxes
withheld.
4.8
Invoicing; Payment
. The Joint Venture
Company shall invoice Intel on a monthly basis for the Price of the
Products provided and all overhead, interest, general and
administrative and other costs, including all start-up costs for
Facilities which shall be split between the Members based on
Sharing Interest. All amounts owed under this Agreement are
stated, calculated and shall be paid in United States
Dollars. Except as otherwise specified in this Agreement, the
Intel shall pay the Joint Venture Company for the amounts due,
owing, and duly invoiced under this Agreement within [***] ([***])
days following delivery of an invoice therefore to such place as
the Joint Venture Company may reasonably direct therein.
4.9
Payment to
Subcontractors .
The Joint Venture Company shall be responsible for and shall hold
Intel harmless for any and all payments to its vendors or
subcontractors utilized in the performance of this
Agreement.
4.10
Delivery, Title and Risk of
Loss . The Joint Venture
Company, in order to ensure timely and complete shipment of
Products to Intel, shall arrange for and pay for all shipping
charges, insurance, taxes, customs charges and any fees and duties
in connection with such shipment. The Joint Venture Company
shall hold title to and risk of loss of Products under this
Agreement, including WIP held by subcontractors, until tender to
the carrier, at which time title and risk of loss and damage to
Products shall transfer to Intel.
4.11
Packaging . All shipment packaging of the Products shall
be in conformance with the Specifications, the Intel’s
reasonable instructions, and general industry standards, and shall
be resistant to damage that may occur during transportation.
Marking on the packages shall be made by Joint Venture Company in
accordance with Intel’s reasonable instructions.
4.12
Shipment . All Products shall be prepared for
shipment in a manner that: (i) follow good commercial practice;
(ii) is acceptable to common carriers for shipment at the lowest
rate; and (iii) is adequate to ensure safe arrival. The Joint
Venture Company shall mark all containers with necessary lifting,
handling, and shipping information, Purchase Order number, date of
shipment, and the names of the Intel and applicable customer.
If no instructions are given, the Joint Venture Company shall
select the most price effective carrier, given the time constraints
known to the Joint Venture Company. At Intel’s
request, the Joint Venture will provide drop-shipment of Products
to Intel’s customers. Such shipment service may be
provided by a subcontractor to the Joint Venture Company provided
that title remains with the Joint Venture Company and then passes
to Intel upon tender to the carrier.
4.13
Customs Clearance
. Upon Intel’s request,
the Joint Venture Company will promptly provide Intel with a
statement of origin for all Products and with applicable customs
documentation for Products wholly or partially manufactured outside
of the country of import.
ARTICLE 5
VISITATIONS,
AUDITS
5.1
Visits . The Joint Venture Company will support
Intel’s reasonable requests for visits to Facilities and
meetings for the purpose of reviewing performance of production of
Products including requests for further information and assistance
in troubleshooting performance issues. Such requests
shall
7
be reasonably granted by the Joint
Venture Company so long as such visits and meetings do not unduly
interfere with the Joint Venture Company’s operations and
business affairs.
5.2
Audit . Intel representatives and key customer
representatives, upon Intel’s request, shall be allowed to
visit the Joint Venture Company’s Facilities during normal
working hours upon reasonable advanced written notice to the Joint
Venture Company for the purposes of monitoring production processes
and compliance with any requirements set forth in this Agreement
and the Specifications. Upon completion of the audit, the
Joint Venture Company and Intel will agree to an audit closure
plan, to be documented in the audit report issued by
Intel.
5.3
Financial Audit
. Intel reserves the right to
have the Joint Venture Company’s books and records related to
the Pricing hereunder inspected and audited not more than [***]
during any Fiscal Year to ensure compliance with Schedule 4.8 of
this Agreement in regards to Pricing. Such audit will be
performed by an independent third party auditor acceptable to both
Parties at Intel’s expense. Intel shall provide [***]
([***]) days advance written notice to the Joint Venture Company of
its desire to initiate an audit and the audit shall be scheduled so
that it does not adversely impact or interrupt the Joint Venture
Company’s business operations. If the audit reveals any
material discrepancies, the Joint Venture Company or Intel shall
reimburse the other, as applicable, for any material discrepancies
within [***] ([***]) days after completion of the audit. The
results of such audit shall be kept confidential by the auditor and
only the discrepancies shall be reported to the Parties, and be
limited to discrepancies identified by the audit.
Notwithstanding the foregoing, any auditor reports shall not
disclose any the Joint Venture Company pricing or terms of purchase
for any purchases of materials or equipment hereunder to Intel,
absent written agreement from the Members’ respective legal
counsel. If any audit reveals a material discrepancy, Intel
may increase the frequency of such audits to [***] for the
subsequent [***] ([***]) month period.
5.4
Subcontractor; Vendor
Visits . The Joint
Venture Company will use commercially reasonable efforts to ensure
that all contracts with vendors and subcontractors will provide the
Joint Venture Company and Intel with the right to visit and audit
rights similar to those set forth in this Article 5
.
ARTICLE 6
WARRANTY; HAZARDOUS MATERIALS;
DISCLAIMER
6.1
Product Warranty
. The Joint Venture Company makes
the following warranties regarding Products furnished hereunder,
which warranties shall survive any delivery, inspection,
acceptance, payment, or resale of the Products:
(a)
Products conform to all agreed
Specifications;
(b)
Products are free from defects in
materials or workmanship; and
(c)
The Joint Venture Company has the
necessary right, title, and interest to provide Products to the
Joint Venture Company and the Products will be free of liens and
encumbrances, not including any implied warranty of
non-infringement.
6.2
Warranty Claims
. [***].
8
6.3
Inspections
. Member may, upon reasonable
advance written notice, request samples of Products (including WIP)
during production for purposes of determining compliance with the
requirements and Specification(s) hereunder, provided that the
provision of such samples shall not materially impact the Joint
Venture Company’s performance to the Operating Plan or its
ability to meet delivery requirements under any accepted Purchase
Order. Any samples provided hereunder shall be: (i) limited
in quantity to the amount reasonably necessary for the purposes
hereunder; (ii) included in the pricing; and (iii) included in any
performance requirements, if any. The Joint Venture Company
shall provide reasonable assistance f
