TABLE OF CONTENTS

 

1.	Definitions		1
	1.1	“Basic Price”	1
	1.2	“Capacity”	1
	1.3	“Engineering Wafers”	1
	1.4	“Forecast”	1
	1.5	“Hot Lot”  and  “Super Hot Lot”	1
	1.6	“Lead-time”	1
	1.7	“Lot”	1
	1.8	“Newport Beach Fab”	1
	1.9	“NRE Services”	1
	1.10	“Party”	2
	1.11	“Photomasks”	2
	1.12	“Production Wafers”	2
	1.13	“Purchase Order”	2
	1.14	“Risk Materials”	2
	1.15	“Wafers”	2
	1.16	“Wafer Acceptance Criteria”	2
	1.17	“Wafer Warranty Period”	2
2.	Purchase and Supply Obligations		2
	2.1	Establishment of Capacity and Volume Commitments	2
3.	Wafer Purchases		3
	3.1	Scope	3
	3.2	Purchase Orders; Delivery Schedule	3
	3.3	Acceptance and Acknowledgement	4
	3.4	Materials	4
	3.5	Risk Materials	4
	3.6	NRE Services	4
	3.7	No Waiver or Release	5
4.	Wafer Delivery and Logistics		5

 

 

5.	Pricing; Credits; and Payments		5
	5.1	Invoicing and Payment	5
	5.2	Wafer Credits	5
	5.3	Costs	6
	5.4	Taxes	6
6.	Tracking; Reporting; and Audits		6
	6.1	Wafer Tracking	6
	6.2	Reporting Requirements	6
7.	Warranty and Disclaimer		6
	7.1	Wafer Warranty	6
	7.2	Disclaimers	6
8.	Indemnification		6
	8.1	RFMD Indemnification Obligations	6
	8.2	JAZZ Indemnification Obligations	7
	8.3	Conditions	7
	8.4	Sole and Exclusive Remedy	7
9.	Confidentiality		8
10.	Limitations of Liability		8
	10.1	DISCLAIMER	8
	10.2	BASIS OF BARGAIN	8
11.	Term; Termination		8
	11.1	Term	8
	11.2	Termination	8
	11.3	Survival	8
12.	General		9
	12.1	Agency	9
	12.2	Governing Law; Venue and Jurisdiction	9
	12.3	Dispute Resolution	9
	12.4	Third-Party Beneficiaries	10
	12.5	Compliance with Law	10

 

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	12.6	Force Majeure	10
	12.7	Amendment; Later Agreement	11
	12.8	Notices	11
	12.9	Assignment	11
	12.10	Waiver	12
	12.11	Severability	12
	12.12	Counterparts and Facsimile	12
	12.13	Rules of Construction	12
	12.14	Entire Agreement	12

 

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LIST OF EXHIBITS

 

EXHIBIT A	PRICING & LEADTIME
EXHIBIT B	WAFER FORECAST
EXHIBIT C	REPORTS
EXHIBIT D	MAP SAMPLE SIZE

 

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WAFER SUPPLY AGREEMENT

 

THIS WAFER SUPPLY AGREEMENT (this “Supply Agreement” ) is entered into as of October 15, 2002 (the “Effective Date” ) by and between NEWPORT FAB, LLC, a Delaware limited liability company d/b/a Jazz Semiconductor ( “JAZZ” ) and RF MICRO DEVICES, INC., a North Carolina corporation ( “RFMD” ).

 

RECITALS

 

RFMD desires, on the terms and conditions of this Supply Agreement, to purchase from JAZZ semiconductor wafers and related foundry manufacturing services.

 

JAZZ is willing to supply such wafers and services to RFMD on the terms and conditions set forth in this Supply Agreement.

 

NOW, THEREFORE , in consideration of the mutual covenants and agreements contained in this Supply Agreement, the Parties agree as follows:

 

AGREEMENT

 

1.              DEFINITIONS.  Capitalized terms not expressly defined elsewhere in this Supply Agreement have the following meanings:

 

1.1           “Basic Price” is defined in Exhibit A (Pricing).

 

1.2           “Capacity” means, as of any date for any period, the average number of wafer starts per day capable of being completed at the Newport Beach Fab during such period, based on available equipment, tools, and personnel , without additional capital spending, equipment purchases, or hiring of personnel .

 

1.3           “Engineering Wafers” means Wafers, manufactured by JAZZ solely for qualification or testing, and which are either (1) initial lot run for a new mask set or mask set revision, (2) any lot run by RFMD with less than 25 wafers, or (3) any lot that is split or placed on hold by RFMD.

 

1.4           “Forecast” is defined in Section 2.1(a) .

 

1.5           “ Hot Lot” and “Super Hot Lot” mean Lots that are processed so as to meet certain accelerated Lead-times specified in writing to RFMD from time to time.

 

1.6           “Lead-time” means the estimated amount of time required from submission of a Purchase Order to delivery, as specified in Exhibit A to this Supply Agreement.

 

1.7           “Lot” means a single lot of Wafers that are processed together.  Each Lot of Production Wafers or Risk Materials shall consist of twenty-five (25) Wafers.  Each Lot of Engineering Wafers shall consist of no less than ten (10) but less than twenty-five (25) Wafers.

 

1.8           “Newport Beach Fab” means the facility and associated assets used by JAZZ to provide specialty process foundry services and to manufacture semiconductor wafers, located in Newport Beach, California.

 

1.9           “NRE Services”  means non-recurring engineering services.

 

 

1.10         “Party” means either RFMD or JAZZ, as the context requires, and “ Parties ” means RFMD and JAZZ collectively.

 

1.11         “Photomasks” means precision photographic quartz or glass plates containing microscopic images of integrated circuits, for use as master images to transfer circuit patterns onto semiconductor wafers during the fabrication of integrated circuits and other semiconductor products.

 

1.12         “Production Wafers” means all Wafers other than Engineering Wafers, manufactured by JAZZ.

 

1.13         “Purchase Order” means a written blanket order for the purchase of a specified quantity of Wafers by process and product submitted by RFMD to Jazz.

 

1.14         “Risk Materials” means Wafers specifically identified by RFMD in a Purchase Order as “Risk Materials” that are to be manufactured by JAZZ, but for which compliance with the Wafer Acceptance Criteria is specifically waived.  “Risk Materials” may include Wafers manufactured with authorized compliance exceptions relating to, for example, unverified process changes, no supporting qualification data, and known design rule violations.

 

1.15         “Wafers” means semiconductor wafers to be processed and prepared for shipping by JAZZ at the Newport Beach Fab, including Engineering Wafers, Production Wafers, and Risk Materials.

 

1.16         “Wafer Acceptance Criteria” means the parametric wafer measurements set forth in JAZZ’s procedures as specified in JAZZ’s document #19091A01 entitled “Wafer Acceptance Criteria,” set forth in Exhibit D.

 

1.17         “Wafer Warranty Period” is defined in Section 7.1 .

 

2.              PURCHASE AND SUPPLY OBLIGATIONS.

 

2.1           Establishment of Capacity and Volume Commitments

 

(a)            Forecast.   Within […***…] prior to the […***…] during the term of this Supply Agreement, RFMD shall submit in writing or electronically to JAZZ a rolling […***…] forecast setting forth the number of Wafers for which the Company shall commence a specified fabrication process (SiGe or CMOS) during each month of the forecast (a “ Forecast ”).

 

(b)            RFMD Volume Commitments .  RFMD shall purchase, at the Contract Price, 100% of the Wafers for which JAZZ is required to commence the SiGe or CMOS fabrication process as specified by RFMD for the […***…] month of the Forecast and for the […***…] of the initial Forecast (a “ Guaranteed Month ”).  The number of Wafers set forth in a Forecast with respect to a Guaranteed Month that RFMD is obligated to purchase pursuant to this section shall be referred to herein as the “Wafer Volume Commitment .”  RFMD may decrease, by the percentages set forth in the following table, the number of Wafers for any month (other than for a Guaranteed Month) of the then current Forecast in the next subsequent Forecast, but in no event shall JAZZ be obligated to supply Wafers for any calendar year in excess of its capacity commitment set forth in Section 2.1(c)  of this Agreement:

 

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JAZZ and RFMD acknowledge that the number of Wafers in a Forecast shall be the number for a certain fabrication process (i.e., SiGe or CMOS), and nothing herein shall restrict changes to the mix of Wafers within a certain fabrication process by RFMD in subsequent Forecasts, provided the total number of Wafers for a certain fabrication process shall be subject to the limitations set forth above.

 

(c)            JAZZ Capacity Commitments .  JAZZ, shall accept each Purchase Order, which is consistent with the Forecast, and fulfill all the amounts in RFMD’s then-current Forecasts up to the baseline amount for each year of the term of this Supply Agreement referenced in Exhibit B (the “ Baseline Commitment ”).  If the amount forecasted in any calendar year exceeds the Baseline Commitment (the amount of such excess being referred to herein as the “ Excess Demand ”), provided such Excess Demand does not exceed […***…] the Baseline Commitment then JAZZ shall use its commercially best efforts to satisfy the Excess Demand, and JAZZ shall not fulfill the demands of any other customers of JAZZ in excess of JAZZ’s minimum commitment to such other customers unless and until JAZZ has fully satisfied the Excess Demand.  Regardless of Baseline or subsequent forecast, Jazz shall at all times agree, upon […***…] advance notice by RFMD, to start […***…] per day during the term of this Agreement.

 

(d)            Preferred Vendor Status.   RFMD shall give JAZZ the first right of refusal to supply all RFMD silicon demand, provided JAZZ is competitive in pricing, technology, quality and delivery, and further provided no material breach as reasonably determined in good faith by RFMD, by Jazz or other Jazz board members, of the Confidentiality Agreement or confidentiality provisions of the Company Second Amended and Restated Stockholder Agreement signed contemporaneously herewith occur.

 

(e)            Lead-Times.   Jazz shall not revise any Lead-time without providing RFMD with […***…] advanced written notice, and in no event shall any Lead-time exceed […***…] of the then current industry average for like processes.

 

3.              WAFER PURCHASES.

 

3.1           Scope. Upon receipt of a Purchase Order from RFMD (as described in Section 3.2(a)  (Purchase Orders)), JAZZ shall produce the Wafers covered by such Purchase Order release as described therein Section 3.3..

 

3.2           Purchase Orders; Delivery Schedule.

 

(a)            Purchase Order.  Simultaneously with providing each Forecast to JAZZ required by Section 2.1 (a), FRMD shall submit to JAZZ a non-cancelable Purchase Order for the number of Wafers for which the fabrication process is to be commenced during the […***…] month of such Forecast, except

 

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that the initial Forecast shall be accompanied by a noncancelable Purchase Order for the number of Wafers for which the fabrication process is to be commenced during the […***…] months of such Forecast.

 

(b)            Delivery Schedule .  JAZZ will acknowledge each Purchase Order with an acknowledgement (a “ Purchase Order Acknowledgment ” ), which shall include a schedule by Wafer part number and quantity, within […***…] of the date of such Purchase Order.

 

3.3           Acceptance and Acknowledgement.  Each Purchase Order submitted shall be accepted by JAZZ up to the Wafer Volume Commitment defined in Section 2.1 and shall be acknowledged by JAZZ within […***…] days of receipt.  Subject to the terms of this Supply Agreement, once JAZZ accepts a Purchase Order, it will be obligated to produce and deliver the Wafers in the volumes specified in the Purchase Order and RFMD will be obligated to purchase such Wafers in the volumes specified in the Purchase Order.  Unless otherwise agreed to in writing by the Parties, Production Wafers shall be ordered by RFMD and delivered by JAZZ in Lots of twenty-five (25) Wafers and Engineering Wafers shall be ordered by FRMD and delivered by JAZZ in Lots of ten (10) to no more than twenty-five (25) Wafers.  Subject to available Capacity, RFMD may request that specified Lots be processed on an expedited basis, in which case JAZZ shall use commercially reasonable efforts to process such Lots on such expedited basis; provided that JAZZ shall have no liability for failure to actually provide expedited processing.  The cost of Wafers delivered on an expedited basis shall be:

 

Engineering Lots and Hot Lots		[…***…] multiplied by the Contract Price (or other price applicable to such Lots for unexpedited processing)
Super-Hot Lots		[…***…] multiplied by the Contract Price (or other price applicable to such Lots for unexpedited processing)

 

Jazz agrees that subject to available capacity loading, Jazz will make commercially reasonable efforts to provide RFMD with accelerated production lot processing at cycle times which are less that the stated Lead-times, but at cycle times greater that Hot Lots.  Such commitments will apply to an agreed upon number of Wafer lots prioritized in conjunction with RFMD and at a mutually agreed upon charge less than the standard Hot Lot processing premium.

 

3.4           Materials.   JAZZ shall be responsible for procuring all materials required to manufacture the quantity of Wafers ordered by RFMD .  Upon JAZZ’s receipt of the GDS Files from RFMD, JAZZ shall obtain and furnish all Photomasks, which shall be at RFMD’s expense.  Jazz shall invoice RFMD for such Photomasks at the start Wafer production.  JAZZ shall be responsible for repair or replacement of any of RFMD ’s Photomasks damaged while in JAZZ’s possession, unless such damage was due to any act or omission of RFMD.

 

3.5           Risk Materials.  At RFMD ’s request and subject to Section 2.1.(b)  (RFMD Volume Commitments) and to any applicable Purchase Order, JAZZ shall process and provide Risk Materials to RFMD .  Each Purchase Order for Risk Materials submitted by RFMD shall include a written statement setting forth the risk factors or any special circumstances related to the Risk Materials and specifying the quantity of Risk Materials to be provided.  JAZZ’s acknowledgement of a Purchase Order for Risk Materials shall be deemed an acknowledgement by RFMD of such risks or circumstances.

 

3.6           NRE Services At RFMD ’s request, the Parties shall negotiate regarding provision by JAZZ of NRE Services to RFMD related to development of new Wafers.  All NRE Services provided pursuant to this Supply Agreement shall be in accordance with the Research and Development Agreement entered into between the parties concurrently herewith.  The Parties shall negotiate in good faith the terms and conditions and any applicable pricing for such NRE Services.

 

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3.7           No Waiver or Release No failure by JAZZ to accept any modification in the volume, delivery date, or other term with respect to any Forecast, Wafer Volume Commitment or Purchase Order proposed by RFMD, provided that JAZZ has the discretion under the terms hereof to accept or reject such proposed modification, shall act as a waiver or release of, or otherwise relieve RFMD from, RFMD’s obligations hereunder to satisfy the Waiver Volume Commitment for each month during the term hereof.

 

4.              WAFER DELIVERY AND LOGISTICS.

 

All Wafers delivered to RFMD shall be delivered F.O.B. the Newport Beach Fab.  Title and risk of loss shall pass from JAZZ to RFMD upon delivery, which shall be deemed made upon transfer by JAZZ of possession to the shipping carrier or to storage if not shipped immediately.  RFMD shall be responsible for all freight, handling and insurance charges subsequent to such delivery.  Except in accordance with the applicable delivery terms set forth in this Supply Agreement, JAZZ shall not have any liability in connection with shipment, nor shall the shipping carrier be deemed to be an agent of JAZZ.

 

5.              PRICING; CREDITS; AND PAYMENTS.

 

5.1           Invoicing and Payment.

 

(a)            Shipped Wafers.   JAZZ will invoice RFMD for Wafers delivered hereunder upon shipment of each Lot, at the applicable Basic Wafer price.  The Contract Price shall mean the price calculated pursuant to the Basic Price applicable to such Wafers in effect on the date of the invoice, less any applicable Wafer Credits (as defined in Section 5.2 (Wafer Credits) below).  RFMD shall pay any amounts due on such invoices within forty (40) days of receipt thereof.  Notwithstanding any other provision hereof, neither Party may offset any amounts owed by such Party to the other Party against any amounts from such other Party, without such other Party’s express written agreement to such offset in each case.

 

(b)            Shortfalls.   The amounts of the Wafer Volume Commitment not purchased by RFMD (“ Shortfalls ”), if any, will be reconciled and invoiced at the end of each month, subject to the allowances provided for in Section 2.1.(b)  attributable to that month, and amounts due in respect thereof, after applying the Wafer Credits, shall be paid by RFMD within forty (40) days thereafter RFMD’s payment of the foregoing amounts in respect to Shortfalls shall be JAZZ’s sole and exclusive remedy, and RFMD’s entire liability, for RFMD’s failure to meet any Forecast hereunder or to release or purchase any Wafers ordered in Purchase Orders.

 

5.2           Wafer Credits.  (a) JAZZ will provide to RFMD credits for the purchase of Wafers from JAZZ, in the amount of […***…] Million U.S. Dollars (U.S. $[…***…]).  Such Wafer Credits shall apply only to the Basic Price (as described in Exhibit A) of Wafers purchased by RFMD .  The amount of the Wafer Credit shall be applied to each and every Wafer purchased by RFMD by the reduction in the Basic Price per wafer invoiced by: […***…] percent ([…***…]%) through December 2003, […***…] percent ([…***…]%) through December 2004, […***…] percent ([…***…]%) through December 2005, […***…] percent ([…***…]%) through December 2006, and […***…] percent ([…***…]%) in all subsequent years until the total amount of Wafer Credits has been satisfied.  Within 10 days after the close of the Jazz accounting month, Jazz will provide to RFMD payment for the wafer credits earned during such accounting period.  The summary provided will reference invoice number, credit earned and date of invoice.

 

(b) Upon the receipt of full payment of the Promissory Note of RFMD in the principal amount of $30 million held by Jazz dated October 15, 2002 (the “RFMD Note”), the amount of the Wafer Credits shall be increased to a total of […***…] Million U.S. Dollars (U.S. $[…***…]) to be applied in accordance with Section 5.2 (a) above.

 

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(c) If the RFMD Note is not paid in full in cash by October 15, 2003, in addition to any other remedy available to Jazz, the unused Wafer Credit remaining as of October 15, 2003 shall be forfeited as of that date.

 

5.3           Costs.  Except as otherwise provided herein or agreed to in writing by the Parties, each Party will be solely responsible for the costs and expenses it incurs in performing its obligations under this Supply Agreement.

 

5.4           Taxes.   RFMD will be responsible for payment of any local, state or federal sales, use and excise or similar taxes or related government charges ( “Taxes” ) imposed on or arising from RFMD ’s purchase of Wafers under this Supply Agreement, excluding any Taxes on the net income or net worth of JAZZ.  All Wafer prices are exclusive of federal, state or local sales, use, excise, or similar taxes applicable to Wafers or mask sets or the fabrication, processing, engineering, or sale thereof.  Any such tax(es) shall be separately itemized on JAZZ’s invoice(s) and paid by RFMD, or, in lieu thereof, RFMD shall furnish JAZZ a properly executed tax exemption certificate prior to shipment.

 

6.              TRACKING; REPORTING; AND AUDITS.

 

6.1           Wafer Tracking.   All Wafers manufactured and delivered by JAZZ to RFMD shall have backward and forward trace ability sufficient to enable JAZZ to identify (i) the processes and materials used in the manufacture of such Wafers; (ii) the batches or lots of such materials; and (iii) other Wafers in the same or sequential lots.  Such information shall be provided to RFMD , upon RFMD ’s reasonable request.

 

6.2           Reporting Requirements.  JAZZ shall provide RFMD with the reports specified in Exhibit C (Reports) or otherwise as mutually agreed to in writing by the Parties.

 

7.              WARRANTY AND DISCLAIMER.

 

7.1           Wafer Warranty.  For a period of […***…] from the date of delivery (the “ Wafer Warranty Period ” ), JAZZ warrants that the Wafers, other than Risk Materials, delivered hereunder will conform to and be manufactured in accordance with the Wafer Acceptance Criteria, and will be free from defects in material, manufacturing and workmanship.  If, during the Wafer Warranty Period, a breach of this warranty is discovered in any Wafers, then JAZZ shall work with RFMD to determine the cause of such defect and appropriate corrective measures, and, at RFMD’s option, (i) promptly begin production to replace the defective Wafers, or (ii) provide RFMD with a credit equal to the purchase price of such Wafers to be applied towards future purchases of Wafers by RFMD.  For the avoidance of doubt, a breach of the foregoing warranty will not give rise to any termination provision under Section 11 (Term; Termination) provided that JAZZ provides the foregoing express and exclusive remedy for any breach of this warranty.

 

7.2           Disclaimers.  EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN THIS SUPPLY AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED OR OTHERWISE, IN CONNECTION WITH THIS SUPPLY AGREEMENT OR ANY WAFERS OR SERVICES PROVIDED UNDER THIS SUPPLY AGREEMENT, AND EACH PARTY SPECIFICALLY DISCLAIMS THE IMPLIED WARRANTIES AND CONDITIONS OF MERCHANTABILITY, FITNESS FOR PARTICULAR PURPOSE AND NONINFRINGEMENT.

 

8.              INDEMNIFICATION.

 

8.1           RFMD Indemnification Obligations.   RFMD agrees to indemnify, hold harmless and defend at its own expense any liability or cost associated with any claim, suit, or action (collectively, “Claims” ) asserted or brought against JAZZ, its Affiliates and its subsidiaries, and their respective officers,

 

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