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. The Joint
Venture Company or its subcontractors will retain possession, but
not ownership of any underlying copyrights, maskworks, or other
intellectual property, of any physical production masks which the
Joint Venture Company has made under this Section 2.6
.
2.7
Designation of WIP
. At Intel’s option, the Joint
Venture Company will ensure that WIP at Facilities or its
subcontractor’s facilities is designated for the Intel from
Wafer Start. If Intel does not elect to have WIP so designated, the
Joint Venture Company will designate the WIP for Intel after Probe
Testing. Custom Product of Intel, if any, must be designated as for
Intel from Wafer Start at all the Facilities or its
subcontractor’s facilities.
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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 . The Intel
will cooperate in good faith with the Joint Venture Company to
transfer Intel’s technology to the Joint Venture Company, if
such technology transfer is required under the Joint Venture
Documents. The Joint Venture Company will establish similar
baseline Product performance standards, including form, fit and
function, at Facilities and subcontracted facilities. Such efforts
will include the provision of up to date equivalent materials
(including correlation wafers), data and information.
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” );
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(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 [***];
(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
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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.
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
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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 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
6
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 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
.
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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
. Within a period of time, not to
exceed the lesser of the actual warranty period applicable to the
end customer for the NAND Flash Memory Product at issue or eighteen
(18) months from the date of the delivery of the Products at issue
to the Intel (“ Warranty Notice Period ”), Intel
shall notify the Joint Venture Company if it believes that any
Product does not meet the Product warranty set forth in Section
6.1. Intel shall return such Products to the Joint Venture Company
as directed by the Joint Venture Company. If a Product is
determined not to be in compliance with such warranty, then Intel
shall be entitled to return such Product and cause the Joint
Venture Company to replace at the Joint Venture Company’s
expense or, at Intel’s option, receive a credit or refund of
any monies paid to the Joint Venture Company in respect of such
Product, save that such credit or refund shall in no event exceed
on a per-unit basis the final price paid for the Product under this
Agreement. The basis for such refund or credit shall be the Price
on a per-unit basis in the month in which the returned Product was
invoiced to the Intel. THE FOREGOING REMEDY IS PARENT’S SOLE
AND EXCLUSIVE REMEDY FOR THE JOINT VENTURE COMPANY’S FAILURE
TO MEET ANY WARRANTY OF SECTION 6.1.
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 for the
safety and convenience of Intel in obtaining the samples in such
manner as shall not unreasonably hinder or delay the Joint Venture
Company’s performance.
6.4
Hazardous Materials
.
(a)
If Products provided hereunder
include Hazardous Materials as determined in accordance with
appli
