Exhibit 10.11
WAFER SUPPLY AND SERVICES
AGREEMENT
among:
SPECIALTYSEMI
, INC.,
a Delaware corporation;
and
CONEXANT
SYSTEMS ,
INC.,
a Delaware corporation
Dated as of March 30,
2002
Confidential treatment is being
requested for portions of this document. This copy of the
document filed as an exhibit omits the confidential
information subject to the confidentiality request. Omissions
are designated by the symbol [...***...]. A complete version
of this document has been filed separately with the Securities and
Exchange Commission.
TABLE OF CONTENTS
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1.
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DEFINITIONS.
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1
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1.1
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“ Affiliate ”
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1
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1.2
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“Basic Price”
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1
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1.3
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“Capacity”
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1
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1.4
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“Conexant Spin-off”
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1
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1.5
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“Contract Price”
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2
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1.6
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“Current Average Probe
Yield
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2
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1.7
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“Delivery Note”
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2
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1.8
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“Engineering
Wafers”
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2
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1.9
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“Fab Yield”
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2
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1.10
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“ Lot”
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2
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1.11
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“Maximum
Capacity”
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2
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1.12
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“Move”
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2
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1.13
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“MPD”
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2
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1.14
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“Non-Specialty
Wafers”
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2
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1.15
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“Party”
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2
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1.16
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“Pizza Mask
Wafers”
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2
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1.17
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“Photomasks”
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2
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1.18
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“Planning Yield
Assumption”
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2
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1.19
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“Probe Services”
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3
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1.20
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“Probe Yield”
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3
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1.21
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“Process
Failure”
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3
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1.22
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“Production
Wafers”
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3
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1.23
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“Purchase Order”
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3
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1.24
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“Purchase Order
Release
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3
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1.25
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“Quality
Specifications”
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3
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1.26
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“Risk Materials”
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3
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1.27
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“Segment”
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3
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1.28
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“Specialty
Wafers”
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3
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1.29
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“Specifications”
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3
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Page
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1.30
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“Third-Party
Requirement
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4
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1.31
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“ Uncommitted Available Capacity
”
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4
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1.32
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“Wafers”
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4
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1.33
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“Wafer Credits”
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4
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1.34
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“Wafer Volume
Commitment”
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4
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1.35
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“WOPD”
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4
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1.36
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“WSPD”
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4
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2.
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PURCHASE AND SUPPLY OBLIGATIONS
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4
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2.1
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Conexant Purchase Obligations
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4
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2.2
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Company Supply Obligations
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8
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3.
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WAFER PURCHASES
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9
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3.1
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Scope
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9
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3.2
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Forecasts
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10
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3.3
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Purchase Orders; Purchase Order Releases;
Specialty Wafers
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10
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3.4
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Acceptance and Acknowledgement
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11
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3.5
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Wafer Lots; Expedited Services
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11
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3.6
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Pizza Mask Wafers
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12
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3.7
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Cancellation and Modifications to
Orders
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12
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3.8
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Materials
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13
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3.9
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Risk Materials
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13
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3.10
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NRE Services
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13
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4.
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PROBE SERVICES AND RE-PROBE
SERVICES
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14
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4.1
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Scope
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14
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4.2
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Purchase Orders
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14
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4.3
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Acknowledgement and Acceptance
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14
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4.4
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Changes, Cancellation and Modifications to
Orders
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14
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4.5
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Removal of Test Equipment from the
Fab
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15
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5.
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DELIVERY AND LOGISTICS
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15
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5.1
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Delivery
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15
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5.2
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Storage
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16
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5.3
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Transition Services Agreement
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16
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ii
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6.
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PRICING; CREDITS; AND PAYMENTS
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16
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6.2
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Wafer Credits
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16
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6.3
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Costs
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17
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6.4
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Taxes
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17
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7.
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TRACKING; REPORTING; AND AUDITS
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17
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7.1
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Wafer Tracking
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17
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7.2
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Reporting Requirements
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17
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8.
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WARRANTY AND DISCLAIMER
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17
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8.1
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Wafer Warranty
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17
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8.2
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Process Failure
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18
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8.3
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Disclaimers
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18
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9.
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INDEMNIFICATION
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18
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9.1
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Conexant Indemnification
Obligations
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18
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9.2
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Company Indemnification
Obligations
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18
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9.3
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Conditions
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19
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9.4
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Sole and Exclusive Remedy
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19
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10.
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CONFIDENTIALITY
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19
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11.
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LIMITATIONS OF LIABILITY
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19
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11.1
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Disclaimer
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19
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11.2
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Basis of Bargain
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20
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12.
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TERM; TERMINATION
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20
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12.1
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Term
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20
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12.2
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Termination
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20
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12.3
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Effect of Termination
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20
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13.
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GENERAL
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21
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13.1
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Agency
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21
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13.2
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Governing Law; Venue and
Jurisdiction
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21
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13.3
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Dispute Resolution
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21
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13.4
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Injunctive Relief
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23
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13.5
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Third-Party Beneficiaries
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23
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13.6
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Compliance with Law
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23
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iii
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13.7
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Force Majeure
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23
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13.8
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Amendment; Later Agreement
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23
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13.9
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Notices
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23
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13.10
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Assignment
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24
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13.11
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Waiver
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24
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13.12
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Severability
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24
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13.13
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Counterparts and Facsimile
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24
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13.14
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Rules of Construction
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25
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13.15
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Schedules and Exhibits
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25
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13.16
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Entire Agreement
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25
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iv
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EXHIBIT A
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PRICING
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EXHIBIT B
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WAFER VOLUME
COMMITMENTS
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SCHEDULE 1
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FORECAST
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SCHEDULE 2
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WAFER MOVES TABLE
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EXHIBIT C
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RULES OF CHANGE, OPERATION, AND
RELEASE PROCEDURES
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EXHIBIT D
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NEWPORT BEACH FAB
CAPACITY
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EXHIBIT E
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WAFER CYCLE TIMES
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EXHIBIT F
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QUALITY
SPECIFICATIONS
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EXHIBIT G
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REPORTS
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v
CONFIDENTIAL
WAFER SUPPLY AND SERVICES
AGREEMENT
THIS WAFER SUPPLY AND SERVICES
AGREEMENT (the
“Supply Agreement” ) is entered into as
of March 30, 2002 (the “Effective
Date” ) by and between CONEXANT SYSTEMS , INC. , a Delaware
corporation ( “ Conexant ” ) and
SPECIALTYSEMI , INC. a
Delaware corporation ( “Company”
).
RECITALS
A.
Conexant
, Company, and Carlyle Capital Investors , L.L.C. have
entered into a Contribution Agreement dated February 23, 2002
(the “Contribution Agreement” )pursuant
to which Conexant contributed to
Company the assets used to provide specialty process foundry
services and to manufacture semiconductor wafers at a facility in
Newport Beach, California (the “Newport Beach
Fab” ).
B.
Conexant
desires, on the terms and conditions
of this Supply Agreement, to purchase from Company semiconductor
wafers and related foundry, manufacturing, and probe services.
Company is willing to supply such wafers and services to
Conexant on the terms and
conditions of 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
“ Affiliate
” means any entity
that at any time during the term of this Supply Agreement controls,
is controlled by, or is under common control with a Party , where control means direct or
indirect ownership of fifty percent (50%) or more of the
outstanding voting stock or other equity interests ordinarily
having voting rights.
1.2
“Basic
Price” is
defined in Exhibit A (Pricing).
1.3
“Capacity”
means, as of any date for any
period, the number of MPD 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 .
1.4
“ Conexant Spin-off” means any entity that is a successor of any
portion of the business of Conexant resulting from a spin-off, sale, or
divestiture of such business, regardless of whether Conexant retains an equity or ownership
interest in such entity. Without limiting the foregoing, the
Parties agree and acknowledge that Mindspeed Technologies and
Conexant ’s wireless
business (which is referred to within Conexant as
“LeaderCo”) are, or upon the date of divestiture will
be, Conexant Spin-offs.
1
1.5
“Contract
Price” is
defined in Exhibit A (Pricing).
1.6
“Current Average Probe
Yield means, for a particular type of
Wafer, the Probe Yield established by averaging the Probe Yield for
two hundred (200) Wafers of such type in each of the three previous
Segments.
1.7
“Delivery
Note” means the
delivery instructions provided by Conexant to Company for Wafers ordered by
Conexant .
1.8
“Engineering
Wafers” means
non-production Wafers manufactured by Company for qualification or
testing and may include Pizza Mask Wafers.
1.9
“Fab
Yield” means the percentage deviation
between a particular number of Wafers for which fabrication is
commenced at the Newport Beach Fab, and the number of such Wafers
for which fabrication is successfully completed, irrespective of
probe results.
1.10
“ Lot”
means a single lot of Wafers that are processed together at the
Newport Beach Fab. Each Lot of Production Wafers, Pizza Mask Wafers
(other than Engineering Wafers), or Risk Materials shall consist of
twenty-five (25) Wafers. Each Lot of Engineering Wafers shall
consist of no less than five (5) and no more than twenty-five
(25) Wafers.
1.11
“Maximum
Capacity” means, as of any date for any
period, the maximum number of MPD capable of being completed at the
Newport Beach Fab during such period based on available equipment,
tools, and personnel, without additional capital spending or
equipment purchases. Maximum Capacity as of the Effective Date is
reflected in Exhibit D (Newport Beach Fab
Capacity).
1.12
“Move” means completion with respect to a single Lot of
an individual stage in any of the processes required in fabricating
Wafers at the Newport Beach Fab, as described in Exhibit B,
Schedule 2 .
1.13
“MPD” means Moves per day at the Newport Beach
Fab.
1.14
“Non-Specialty
Wafers” means
all Wafers of all types other than Specialty Wafers.
1.15
“Party” means either Conexant or Company, as the context requires,
and “Parties” means Conexant and Company collectively.
1.16
“Pizza Mask
Wafers” means
multiple device designs on a single Wafer.
1.17
“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.
1.18
“Planning Yield
Assumption” means, for any given type of Wafer, the
expected percentage deviation
between the number of Wafers specified for delivery in a Purchase
Order and
2
the total number of Wafers actually
delivered, as set forth in Exhibit B, Schedule 2
as such exhibit may be updated from time to time upon written
notice from Company.
1.19
“Probe
Services” means
electrical testing of individual semiconductor wafers on a
substrate.
1.20
“Probe
Yield” means the percentage deviation
between a particular number of Wafers for which probing is
conducted at the Newport Beach Fab, and the number of such Wafers
that probe successfully.
1.21
“Process
Failure” means
a fault or flaw in the performance
of any process within the fabrication operation that is not due to designs, specifications,
Photomasks, or instructions provided by Conexant .
1.22
“Production
Wafers” means
Wafers manufactured by Company at the Newport Beach Fab after
successful qualification and approval for mass
production.
1.23
“Purchase
Order” means a
written blanket order for the purchase of a specified quantity of
Wafers or Probe Services submitted by Conexant to Company.
1.24
“Purchase Order
Release” means
a written release issued by Conexant authorizing Company to commence
processing of the Wafers under a Purchase Order.
1.25
“Quality
Specifications” means the Wafer quality standards and criteria
set forth in Exhibit F (Quality Specifications), as may
they be modified by written agreement of the Parties from time to
time.
1.26
“Risk
Materials” means Wafers specifically identified by
Conexant in a Purchase Order as
“Risk Materials” that are to be manufactured by Company
pursuant to Conexant ’s
Specifications, but for which compliance with the Quality
Specifications is specifically waived. “Risk Materials”
may include the following: unverified mask sets, unverified process
changes, no supporting qualification data, and known design
rule violations.
1.27
“Segment”
means any one of the following
two-calendar month periods: April-May, June-July, August-September,
October-November, December-January, and February-March. Segments
shall be numbered sequentially during the term of this Supply
Agreement, commencing with Segment 1, which shall be the first full
Segment following the Effective Date.
1.28
“Specialty
Wafers” means
Bipolar, Bi-CMOS, and SiGe Wafers.
1.29
“Specifications”
means the technical specifications
for the Wafers in effect at the Newport Beach Fab immediately prior
to the Effective Date, as they may be modified from time to time by
written agreement of the Parties, or if such technical
specifications do not exist as of the Effective Date, then those
technical specifications mutually agreed to in writing by the
Parties for such Wafers, as they may be modified from time to time
written agreement of the Parties.
3
1.30
“Third-Party
Requirement means any
oral or written commitment from a customer (other than Conexant or a Conexant Spin-Off or a Conexant Affiliate) to engage Company to
manufacture Wafers or provide related services for such customer at
the Newport Beach Fab, which commitment is reasonably likely to
result in a binding obligation.
1.31
“ Uncommitted Available
Capacity ” means, at any given time, the Capacity remaining
at the Newport Beach Fab after excluding all Capacity necessary to
fulfill the Company’s commitments under this Supply Agreement
and Third-Party Requirements.
1.32
“Wafers” means semiconductor wafers to be processed and
prepared for shipping by Company at the Newport Beach Fab including
Engineering Wafers, Production Wafers, Pizza Mask Wafers, and Risk
Materials.
1.33
“Wafer
Credits” is
defined in Section 6.2 (Wafer Credits).
1.34
“Wafer Volume
Commitment” is
defined in Section 2.1(a) (Volume
Commitments).
1.35
“WOPD” means a number of Wafers for which the
fabrication process is completed at the Newport Beach Fab in a
single day.
1.36
“WSPD” means a number of Wafers for which the
fabrication process is commenced at the Newport Beach Fab in a
single day.
2.
PURCHASE AND SUPPLY
OBLIGATIONS.
2.1
Conexant
Purchase
Obligations.
(a)
Volume Commitments
. Subject to the terms and
conditions of this Supply Agreement and in accordance with the
procedures set forth in Section 3.3 (Purchase Orders;
Purchase Order Releases; Specialty Wafers), Conexant will submit Purchase Orders to
Company for the manufacture of, and will purchase pursuant to such
Purchase Orders, Wafers in volumes sufficient to meet the minimum
MPD purchase commitments set forth
in Exhibit B, Schedule 1 (the “Wafer
Volume Commitments” ), at the prices set forth
below.
(b)
Segments 1 Through 6.
During Segments 1 through
6:
(i)
Conexant
shall meet the Wafer Volume
Commitment corresponding to the current Period set forth in
Exhibit B, Schedule 1 .
(ii)
For any of Segments 1 through 6 in
which the number of Wafers purchased by Conexant at the end of the
Segment is less than the greater of (i) the Wafers ordered in
the Purchase Order for such Segment described in
Section 3.3(a) and (ii) the Wafer Volume Commitment
for such Segment, in addition to the amounts paid for Wafers
purchased, Conexant shall pay the following in respect of the
shortfall in the Wafers purchased compared to the greater of
(i) the Wafers ordered in the Purchase Order for such Segment
described in Section 3.3(a) and (ii) the Wafer
Volume Commitment (the “Shortfall”):
4
(1)
[…***…] of the Contract
Price for the Shortfall up to the difference between the Wafer
Volume Commitment and the Wafers ordered in the Purchase Order
described in Section 3.3(a) ( unless the
number of Wafers ordered in the Purchase Order described in
Section 3.3(a) equals or exceeds the Wafer Volume
Commitment, in which case this portion will be equal to
[…***…]); plus
(2)
[…***…] of the Contract
Price for the portion of the Shortfall not covered in
Section 2.1(b)(ii)(1) above (if any), up to the
lesser of (i) the difference between (A) the number of
Wafers purchased in the Working Segment and (B) the Wafer
Volume Commitment (unless the number of Wafers purchased exceeds
the Wafer Volume Commitment, in which case this amount will be
equal to […***…]); and (ii) the difference between
the Wafers covered in Section 2.1(b)(ii)(1) and
[…***…] of the Wafer Volume Commitment; plus
(3)
[…***…] of the Contract
Price for the portion of the Shortfall not covered in
Section 2.1(b)(ii)(1) or in
Section 2.1(b)(ii)(2) above (if any).
Example 1. The Wafer Volume Commitment
is […***…]
WSPD. Thirty days prior to the beginning of the Working Segment,
Conexant orders the Wafer equivalent of […***…]
WSPD for the Working Segment. At the end of the Segment,
Conexant purchases the Wafer equivalent of […***…]
WSPD. The Shortfall is the Wafer equivalent of
[…***…] WSPD. Conexant pays […***…]
on a Wafer equivalent of […***…] WSPD,
[…***…] on a Wafer equivalent of
[…***…] WSPD, and […***…] on a
Wafer equivalent of […***…] WSPD.
Example 2. The Wafer Volume
Commitment is […***…] WSPD. Thirty days prior
to the beginning of the Working Segment, Conexant orders the Wafer
equivalent of […***…] WSPD for the Working
Segment. At the end of the Segment, Conexant purchases the Wafer
equivalent of […***…] WSPD. The Shortfall is the
Wafer equivalent of […***…] WSPD. Conexant
pays […***…] on a Wafer equivalent of
[…***…] WSPD, and […***…] on the
Wafer equivalent of […***…] WSPD.
(iii)
If, in any of Segments 1 through 6,
Conexant fails to meet the Wafer Volume Commitment or to purchase
Wafers ordered in the Purchase Order for such Segment described in
Section 3.3(a), and as a result pays any amounts pursuant to
Section 2.1(b)(ii) , and, prior to the end of Segment
6, purchases Wafers in excess of the Wafer Volume Commitment for
the Working Segment, then Conexant shall be required to pay only
[…***…] of the Contract Price for all Wafers purchased
in such Working Segment in excess of the Wafer Volume Commitment,
until the total number purchased up to that time equals the greater
of (A) the average of the total Wafer Volume Commitment for
Segments 1 through 6, pro-rated to the time in question; or
(B) the average of the total Wafers ordered in Purchase Orders
pursuant to Section 3.3(a) during Segments 1
through 6 for which Conexant paid amounts pursuant to
Section 2.1(b)(ii) , pro-rated to the time in question.
Conexant will pay the Contract Price, Basic Price, or other price
specified in this Supply Agreement, as appropriate, for any
additional Wafers purchased in the Working Segment
thereafter.
(c)
Segments 7 Through 18.
During Segments 7 through
18:
5
(i)
Conexant
shall meet the Wafer Volume
Commitment for such period set forth in Exhibit B,
Schedule 1 .
(ii)
In the event that the number of
Wafers purchased under the Purchase Order(s) for any Working
Segment is less than the greater of (i) the Wafers ordered in
the Purchase Order for such Segment described in
Section 3.3(a) and (ii) the Wafer Volume Commitment
for the Working Segment, Conexant
shall pay to Company, in addition to the Contract Price for the
Wafers actually purchased , an
amount equal to one hundred percent (100%) of the total Contract
Price for the Shortfall for such Segment.
(d)
Requirements in Excess of the
Wafer Volume Commitment .
(i)
Non-Specialty Wafers
. During Segments 1 through 24,
except to the extent that it has any preexisting obligations as of
the Effective Date to purchase Non-Specialty Wafers from third
parties , (and, only during Segments 18
through 24, upon the additional condition that Company is
competitive on cost, service, yield and technology for those
Non-Specialty Wafers) , Conexant
shall submit all requirements for Non-Specialty Wafers that are in
excess of the Wafer Volume Commitment to Company, which, provided
that it has sufficient Uncommitted Available Capacity, shall be
obligated to produce such Wafers, and Conexant shall be obligated to purchase such
Wafers at the Contract Price, except during Segments 13 through 24.
During Segment 13 and the first month of Segment 14 (
“Quarter 9” ), Conexant will purchase such Wafers at a price
equal to the sum of the Contract Price and […***…] of
the difference between the Contract Price and the Basic Price.
During the second month of Segment 14 and Segment 15 (
“Quarter 10” ), Conexant will purchase such Wafers at a price
equal to the sum of the Contract Price and […***…] of
the difference between the Contract Price and the Basic Price.
During Segment 16 and the first month of Segment 17 (
“Quarter 11” ), Conexant will purchase such Wafers at a price
equal to the sum of the Contract Price and […***…] of
the difference between the Contract Price and the Basic Price (in
each of Quarters 9, 10, and 11, the prices described for each
respective Quarter shall be referred to as the “Stepped
Price”). During Segments 18 through 24, Conexant will purchase such Wafers at the
Basic Price.
(ii)
Specialty Wafers
. During Segments 1 through 12,
Conexant may submit its
requirements for Specialty Wafers in excess of the Wafer Volume
Commitment to Company, which, provided that it has sufficient
Uncommitted Available Capacity, shall be obligated to produce such
Wafers. Conexant shall purchase
such Wafers at the Contract Price.
(e)
Surge Capacity
. At any time after Conexant ’s submission of a Purchase
Order for any Working Segment, Conexant may request to increase the number
of Wafers to be purchased in such Working Segment (an
“Increase Notice” ).
(i)
Segments 1 through 18.
During Segments 1 through 18, the
following terms will apply:
(1)
Commitment Surge.
If Conexant submits an Increase
Notice with at least […***…] advance notice for
additional Wafers in order to meet a Wafer Volume Commitment (
“Commitment Surge Wafers” ), Company will
fabricate and sell to Conexant a number of Commitment Surge Wafers
equal to the lesser of (A) […***…]; or
(B) the
6
equivalent of no more than […***…]
WSPD. Company will use commercially reasonable efforts to deliver
the Commitment Surge Wafers as soon as possible. Conexant will pay
the […***…] for all Commitment Surge Wafers.
(2)
Beyond Commitment
Surge. If Conexant
submits an Increase Notice with at least […***…]
advance notice for additional Wafers that either (A) are
[…***…]; or (B) represent the equivalent of more
than […***…] WSPD ( “Additional
Wafers” ), Company will use commercially reasonable
efforts to fabricate and sell to Conexant the number of Additional
Wafers ordered by Conexant. Conexant will pay […***…]
for all Additional Wafers.
(ii)
After Segment 18.
After Segment 18, at any time after
Conexant ’s submission of a
Purchase Order for any Working Segment, Conexant may submit an Increase Notice to
Company. If Company has Uncommitted Available Capacity, Company
will fabricate and sell to Conexant such additional Wafers, or as many as
can be fabricated in light of the Uncommitted Available Capacity.
Conexant will pay […***…] for all such additional
Wafers purchased after Segment 18.
(f)
Purchases for Certain
Entities. Company agrees
that Conexant , as agent, may
place orders for any Conexant
Spin-Off or Conexant Affiliate,
under the same terms and conditions for Wafers established under
this Supply Agreement. The Parties acknowledge and agree that at
any time after a Conexant Spin-off
commences operations as a separate legal entity, (i)
Conexant may partition the Wafer
Volume Commitments between Conexant and Conexant Spin-offs, assuring that the total
volume meets the total Wafer Volume Commitment; (ii)
Conexant and Conexant Spin-offs may partition Wafer Credits
between them, provided, however, that the total number of Wafer
Credits held by Conexant and all
Conexant Spin-offs will not exceed
the original number of Wafer Credits; and (iii) each
Conexant Spin-off (a
“Participating Spin-off” ) may enter into
a separate agreement with Company containing all of the terms and
conditions of this Supply Agreement, in which case the
Participating Spin-off will order Wafers directly from Company.
Company will have the right to review the allocation of Wafer Volume Commitments
, Wafer Credits , and other rights hereunder partitioned and
assigned to each Participating Spin-off, and Conexant will work in good faith with Company
to resolve any reasonable objections that the Company may have to
such allocation . If Conexant and Participating Spin-offs partition
Wafer Volume Commitments as set forth above, the determination of
whether the Wafer Volume Commitment is met will be determined on a
collective basis, and no additional payments to meet the Wafer
Volume Commitment will be due to Company if the total number of
Wafers purchased by Conexant and
Participating Spin-offs is sufficient to meet or exceed the
applicable Wafer Volume Commitment. Conexant will remain responsible to Company for satisfaction of Wafer purchase and payment obligations hereunder ,
regardless of whether it is
Conexant itself or a Participating
Spin-off that fails to
satisfy any such obligations . In
the event that a third party acquires any Participating Spin-off,
its business, or all or substantially all of its assets, then such
third party may only assume the rights of Participating Spin-offs
hereunder with respect to Wafer types of such Participating
Spin-off that have been manufactured or are under development by
the Newport Beach Fab at the time of such acquisition.
(g)
Cooperation
. Conexant shall cooperate with Company in
furtherance of the purposes hereof by timely furnishing all design
information, Photomasks, specifications,
7
intellectual property, and other
items and information needed to fabricate the Wafers ordered by
Conexant , and by providing
reasonable technical advice and assistance in such
efforts.
(h)
Payment; Remedy.
All determinations of whether Wafer
Volume Commitments have been met during any Working Segment shall
be determined at the end of such Working Segment, and all amounts
to be paid in respect of portions of the Wafer Volume Commitment
not purchased in accordance with this Section will be tracked
monthly, and reconciled and paid at the end of each Working
Segment. Conexant ’s payment
of the foregoing amounts shall be Company’s sole and
exclusive remedy, and Conexant
’s entire liability, for Conexant ’s failure to meet any Wafer
Volume Commitment hereunder or to purchase any Wafers ordered in
Purchase Orders pursuant to Section 3.3(a) during
Segments 1 through 18.
2.2
Company Supply
Obligations.
(a)
Commitment
; Requests for Increased Capacity
. Company shall be able to provide
the Capacity to satisfy the Wafer Volume Commitments set forth in
Exhibit B, Schedule 1 during each Segment of the
term of this Supply Agreement, and will accept and fulfill all
Purchase Orders that are submitted pursuant to the
[…***…] Purchase Order requirements set forth in
Section 3.3 (Purchase Orders; Purchase Order Releases;
Specialty Wafers) up to the applicable Wafer Volume Commitments. In
addition, upon Conexant ’s
request, Company will increase (and maintain for a period of time
specified by Conexant ) Capacity
up to the Maximum Capacity of the
Newport Beach Fab, provided that (i) Company will have no less
than three (3) Segments in which to accomplish such increase;
(ii) in no event will Company be required to increase Capacity
by an increment equivalent to more than fifty (50) WSPD for any
three (3) Segment period; and (iii) at the time of its
request, Conexant submits binding
Purchase Orders for a total number of Wafers sufficient to utilize
the requested increase in Capacity for the period of the desired
increase.
(b)
Notice Requirements.
If at any time Company believes or
becomes aware that it would be unable to satisfy the Wafer
requirements of Conexant
contained in the latest Order Forecast, then Company will promptly
notify Conexant in
writing.
(c)
Wafer Processes.
This Supply Agreement applies to all
processes currently available or in development at the Newport
Beach Fab. Future processes that are developed by the Company may
be added to this Supply Agreement by mutual consent. Subject to the
restrictions in this Section 2.2(c) , Company may
terminate the use of a Wafer process at the Newport Beach Fab. At
least […***…] prior to the date of the discontinuance
of any process with respect to any Wafers, Company shall provide
Conexant with written notice of
its intent to terminate such Wafer process and shall cooperate with
Conexant on a transition plan with
respect to Conexant ’s
supply of Wafers. If the projected or actual volume on any process
decreases to less than the equivalent of […***…] WSPD
over […***…] consecutive Segments, Company may phase
out such process without such […***…] notice,
provided that Conexant and Company will in such case
cooperate to phase out such process in a timely manner through an
end-of-life buy. Company will perform the transition in accordance
with the plan and will use commercially reasonable efforts to
ensure a smooth transition.
8
(d)
Closing of Newport Beach
Fab. Company shall notify
Conexant at least
[…***…] prior to the date that Company intends to
commence any closure, in whole or in part, of the Newport Beach
Fab. Company shall prepare and obtain Conexant ’s written approval on a
transition plan to transfer the Wafer processing technologies
requested by Conexant to a foundry
or foundries designated by Conexant and specifically designed to ensure
that there is no interruption in Conexant ’s supply of Wafers. The time
to prepare and approve the transition plan will be completed in
parallel with the […***…] notification period. Both
Parties will use commercially reasonable efforts to
(i) transfer the Wafer processing technology in accordance
with the Conexant -approved plan
and (ii) ensure a smooth transition of Wafer processing
including making available Company engineers to assist the
designated foundry or foundries in implementing and qualifying the
Wafer processing technology and to promptly respond to inquiries
regarding the use of such processes or technology. Conexant shall reimburse Company for the
actual out-of-pocket expenses incurred by Company, and pre-approved
by Conexant , in transitioning
such technology to the designated foundry or foundries.
Conexant will have the right,
until such time as the designated foundry or foundries is
operational and qualified to process the Wafers, to continue to
submit Purchase Orders for Wafers to Company. Company will continue
to manufacture, supply, and provide to Conexant , in accordance with the Wafer
purchase procedures in Section 3 (Wafer Purchases), any
such Wafers that are ordered. The foregoing obligations are in
addition to Company’s other obligations under this Supply
Agreement.
(e)
Supply Interruptions.
If at any time Company experiences a
Material Interruption (as defined below), Conexant’s Wafer
Volume Commitments shall be reduced by the number of Wafers Company
is unable to supply for the actual duration of such Material
Interruption, provided, however, that if such Material Interruption
results from Conexant’s failure to provide any services that
Conexant is obligated to provide under the Information Technology
Service Agreement of even date herewith by and between Company and
Conexant, then Conexant’s Wafer Volume Commitment shall not
be reduced as a result of such Material Interruption. If an
unintended interruption in Company’s ability to fulfill its
supply obligations occurs that is not a Material Interruption,
Conexant shall remain obligated to satisfy its obligations
hereunder to purchase Wafers, provided, that if, due to such
interruption, Company is unable to deliver a number of Wafers
ordered to fulfill a portion of a Wafer Volume Commitment prior to
the end of the Segment, then Conexant will be excused from that
portion of the Wafer Volume Commitment for that Segment, and such
portion will be rolled over to be fulfilled by the end of the
following Segment. This provision shall not limit any other rights
or remedies Conexant or Company may have for a breach of this
Supply Agreement or otherwise, and nothing in this provision is
intended to supersede, restrict, or otherwise limit either
party’s rights under Section 13.7 (Force Majeure). For
purposes of this Section, “Material Interruption” means
an unintended interruption in Company’s ability to produce
Wafers that (i) endures for more than a period of
[…***…], and (ii) causes a reduction in Capacity
of […***…] or more WSPD.
3.
WAFER PURCHASES.
3.1
Scope. Upon receipt of an applicable Purchase Order
Release (as described in Section 3.3(b) (Purchase
Order Releases) below), Company shall produce Wafers and provide
Probe Services for Conexant .
Wafers may include Production Wafers, Engineering Wafers, and Risk
Materials from any semiconductor wafer process in production, or
released to production, at the Newport Beach Fab on or after the
Effective Date. For new Wafers or processes requested by
9
Conexant
, Conexant will provide Company with the
documentation substantially similar to the document(s) set forth in
Exhibit C (Rules of Change, Operation and Release
Procedures), as applicable to the requested process. Both Parties
agree to cooperate to provide all necessary information as
described in Exhibit C .
3.2
Forecasts.
On or about the last day of each
calendar month during the term of this Supply Agreement,
Conexant will provide to Company a
rolling forecast, covering a minimum period of […***…],
of Conexant ’s expected
order volumes for Wafers in the coming […***…] (the
“Order Forecast” ). The Order Forecasts
are for planning purposes only and will not bind Conexant or the Company in any respect. No
deviation of actual volumes from the forecasted volumes will
relieve Conexant or Company of
their respective responsibilities and obligations under this Supply
Agreement or affect the pricing established under this Supply
Agreement. Subject to the requirements of Section 2.1
(Conexant Purchase Obligations), Conexant may change or update the forecasts
delivered hereunder at any time upon notice to Company.
3.3
Purchase Orders; Purchase Order
Releases; Specialty Wafers .
(a)
Purchase Order.
Not later than […***…]
prior to the first business day of each Segment during the term of
this Supply Agreement (other than Segment 1), Conexant shall submit to Company a written
Purchase Order setting forth the specific volume and mix of Wafers
[…***…] it intends to purchase under this Supply
Agreement during the following Segment (the “ Working
Segment” ), expressed as total WSPD per type of
Wafer. Conexant shall not load the Newport Beach Fab by a number of
WSPD in each day of the Working Segment set forth in such Purchase
Order that deviates by more than plus or minus […***…]
WSPD from the average number of WSPD per day for the entire Working
Segment, as determined by dividing the total number of WSPD for the
entire Working Segment set forth in such Purchase Order by sixty
and two-thirds (60 2/3) days. The Purchase Order for Segment 1 will
be submitted to Company within three (3) business days after
the Effective Date.
(b)
Purchase Order
Releases
Conexant will submit
[…***…] Purchase Order Releases against outstanding
Purchase Orders, to be submitted by close
of business on […***…] for Wafers to be released
[…***…] Each Purchase Order Release for
Wafers will specify the applicable Purchase Order, Wafer part
number and revision level, quantity, additional component parts
required by Conexant , price,
delivery date, ship-to address, and other applicable information as
determined by Conexant . Purchase
Order Releases shall not deviate from the volumes and mixes
specified for the corresponding period of time in the applicable
Purchase Order, except that Conexant may (i) modify the volume of
Wafers by no more than plus or minus […***…] WSPD from
the specified volume for the applicable period of time in the
applicable Purchase Order; and (ii) […***…],
subject to available Capacity at the Newport Beach Fab.
Notwithstanding the receipt of a Purchase Order, Company will not
commence manufacturing of the Wafers under a Purchase Order until
Conexant has issued a Purchase
Order Release.
(c)
Reserved SiGe Wafers.
If, at any time Company receives a
written order (a “SiGe Order” ) from a
third party customer for the purchase of SiGe Wafers, and Company
lacks sufficient Capacity to fill the SiGe Order because it is
obligated to reserve such Capacity for SiGe Wafers that have been
ordered but not yet released by Conexant pursuant to
Section 3.3(b) (Purchase Order Releases) above
(the “Reserved SiGe Wafers” ), Company
may notify Conexant
10
of the SiGe Order and require
Conexant to confirm that it will
issue a Purchase Order Release for such Reserved SiGe
Wafers.
(i)
If Conexant confirms that it will issue a
Purchase Order Release for the Reserved SiGe Wafers and later does
so, then Company will fill the Purchase Order Release for the
Reserved SiGe Wafers […***…].
(ii)
If Conexant confirms that it will issue a
Purchase Order Release for the Reserved SiGe Wafers and later fails
to do so, then Conexant will pay
to Company an amount equal to […***…], up to the number
of SiGe Wafers made unavailable due to Conexant ’s failure to cancel the
unreleased Reserved SiGe Wafers.
(iii)
If Conexant agrees to cancel the Reserved SiGe
Wafers, then (A) Company will be relieved of any further
obligation to hold the Capacity for the Reserved SiGe Wafers or
deliver the Reserved SiGe Wafers to Conexant ; and (B) Company may utilize
the previously reserved Capacity to fill the SiGe Order.
3.4
Acceptance and
Acknowledgement All
Purchase Orders submitted at least […***…] prior to the
start of the Working Segment for Wafers shall be accepted by
Company up to the Wafer Volume Commitment and as specified in
Section 2.1(d) (Requirements in Excess of the
Wafer Volume Commitment), and may be accepted by Company in all
other cases. Subject to the terms of this Supply Agreement, once
Company accepts a Purchase Order, it will be obligated to produce
and deliver the Wafers in the volumes specified in the Purchase
Order (subject to the applicable Planning Yield Assumption), and
Conexant will be obligated to purchase such Wafers in the volumes
specified in the Purchase Order. Within […***…] after
receipt of each Purchase Order or Purchase Order Release or, if
received on a non-business day or on the day prior to a
non-business day, within […***…], Company will
acknowledge such Purchase Order or Purchase Order Release in
writing by either fax or e-mail notice to Conexant ’s purchasing agent identified
on the face of the Purchase Order or Purchase Order Release. Such
acknowledgement will include Company’s projected delivery
date for the order; provided that, in establishing such delivery
date, Company shall use reasonable efforts to comply with the
delivery dates specified in Conexant ’s Purchase Order Release. The
Wafer process cycle times set
