WAFER SUPPLY AND SERVICES AGREEMENT

 

 

TABLE OF CONTENTS

 

1.	DEFINITIONS		1
	1.1	“ Affiliate ”	1
	1.2	“Basic Price”	1
	1.3	“Capacity”	2
	1.4	“Conexant   Spin-off”	2
	1.5	“Contract Price”	2
	1.6	“Current Average Probe Yield	2
	1.7	“Delivery Note”	2
	1.8	“Engineering Wafers”	2
	1.9	“Fab Yield”	2
	1.10	“ Lot”	2
	1.11	“Maximum Capacity”	2
	1.12	“Move”	2
	1.13	“MPD”	2
	1.14	“Non-Specialty Wafers”	2
	1.15	“Party”	3
	1.16	“Pizza Mask Wafers”	3
	1.17	“Photomasks”	3
	1.18	“Planning Yield Assumption”	3
	1.19	“Probe Services”	3
	1.20	“Probe Yield”	3
	1.21	“Process Failure”	3
	1.22	“Production Wafers”	3
	1.23	“Purchase Order”	3
	1.24	“Purchase Order Release	3
	1.25	“Quality Specifications”	3
	1.26	“Risk Materials”	3
	1.27	“Segment”	3
	1.28	“Specialty Wafers”	4
	1.29	“Specifications”	4

 

 

			Page
	1.30	“Third-Party Requirement	4
	1.31	“ Uncommitted Available Capacity ”	4
	1.32	“Wafers”	4
	1.33	“Wafer Volume Commitment”	4
	1.34	“WOPD”	4
	1.35	“WSPD”	4
2.	PURCHASE AND SUPPLY OBLIGATIONS		4
	2.1	Skyworks Purchase Obligations	4
	2.2	Company Supply Obligations	8
3.	WAFER PURCHASES		9
	3.1	Scope	9
	3.2	Forecasts	9
	3.3	Purchase Orders; Purchase Order Releases; Specialty Wafers	10
	3.4	Acceptance and Acknowledgement	11
	3.5	Wafer Lots; Expedited Services	11
	3.6	Pizza Mask Wafers	12
	3.7	Cancellation and Modifications to Orders	12
	3.8	Materials	13
	3.9	Risk Materials	13
	3.10	NRE Services	13
4.	PROBE SERVICES AND RE-PROBE SERVICES		13
	4.1	Scope	13
	4.2	Purchase Orders	14
	4.3	Acknowledgement and Acceptance	14
	4.4	Changes, Cancellation and Modifications to Orders	14
	4.5	Removal of Test Equipment from the Fab	15
5.	DELIVERY AND LOGISTICS		15
	5.1	Delivery	15
	5.2	Storage	15
	5.3	Transition Services Agreement	16
6.	PRICING; CREDITS; AND PAYMENTS		16

 

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			Page
	6.2	Costs	16
	6.3	Taxes	16
7.	TRACKING; REPORTING; AND AUDITS		16
	7.1	Wafer Tracking	16
	7.2	Reporting Requirements	17
8.	WARRANTY AND DISCLAIMER		17
	8.1	Wafer Warranty	17
	8.2	Process Failure	17
	8.3	Disclaimers	17
9.	INDEMNIFICATION		17
	9.1	Skyworks Indemnification Obligations	17
	9.2	Company Indemnification Obligations	18
	9.3	Conditions	18
	9.4	Sole and Exclusive Remedy	18
10.	CONFIDENTIALITY		19
11.	LIMITATIONS OF LIABILITY		19
	11.1	Disclaimer	19
	11.2	Basis of Bargain	19
12.	TERM; TERMINATION		19
	12.1	Term	19
	12.2	Termination	19
	12.3	Effect of Termination	20
13.	GENERAL		20
	13.1	Agency	20
	13.2	Governing Law; Venue and Jurisdiction	20
	13.3	Dispute Resolution	20
	13.4	Injunctive Relief	22
	13.5	Third-Party Beneficiaries	22
	13.6	Compliance with Law	22
	13.7	Force Majeure	22
	13.8	Amendment; Later Agreement	23

 

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			Page
	13.9	Notices	23
	13.10	Assignment	23
	13.11	Waiver	24
	13.12	Severability	24
	13.13	Counterparts and Facsimile	24
	13.14	Rules of Construction	24
	13.15	Entire Agreement	24

 

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EXHIBIT A	PRICING
EXHIBIT B	WAFER VOLUME COMMITMENTS
SCHEDULE 1		FORECAST
SCHEDULE 2		WAFER MOVES TABLE
EXHIBIT C	RULES OF CHANGE, OPERATION, AND RELEASE PROCEDURES
EXHIBIT D	NEWPORT BEACH FAB CAPACITY
EXHIBIT E	WAFER CYCLE TIMES
EXHIBIT F	QUALITY SPECIFICATIONS
EXHIBIT G	DELIVERY AND LOGISTICS
EXHIBIT H	REPORTS

 

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CONFIDENTIAL

 

Wafer Supply and Services Agreement

 

This Wafer Supply and Services Agreement (the “Supply Agreement” ) is entered into as of May 2, 2003 (the “Skywork Effective Date” ) by and between Jazz Semiconductor a Delaware limited liability company ( “ Jazz ” or “Company” ) and Skyworks Solutions, Inc . a Delaware corporation ( “Skyworks” ).

 

Recitals

 

A.             Conexant Systems, Inc. (“Conexant”), Company, and Carlyle Capital Investors, L.L.C. 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.             Skyworks began operations in June 2002, following the completion of the merger between Alpha Industries, Inc. and Conexant Systems, Inc.’s wireless communications business.

 

C.             A Wafer Supply and Services Agreement was entered into as of March 30, 2002 (the “CNXT Effective Date” ) by and between Conexant Systems, Inc. , a Delaware corporation ( “ Conexant ” ) and Specialtysemi , Inc . a Delaware corporation now known as Jazz Semiconductor, Inc. (the “CNXT Supply Agreement” )  The CNXT Supply Agreement contains Section 2.1 (f)  (iii) stating each Conexant Spin-off (a “Participating Spin-off” ) may enter into a separate agreement with Company containing all of the terms and conditions of the CNXT Supply Agreement, in which case the Participating Spin-off will order Wafers directly from Company.

 

D.             Skyworks desires to enter into such 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 Skyworks 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).

 

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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 (formerly referred to within Conexant as “LeaderCo”, herein referred to as “Skyworks”) are, or upon the date of divestiture will be, Conexant Spin-offs.

 

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 Skyworks to Company for Wafers ordered by Skyworks.

 

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.

 

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1.15         “Party” means either Skyworks or Company, as the context requires, and “Parties” means Skyworks 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 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 Skyworks or 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 Skyworks to Company.

 

1.24         “Purchase Order Release“ means a written release issued by Skyworks 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 Skyworks in a Purchase Order as “Risk Materials” that are to be manufactured by Company pursuant to Skyworks’ 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

 

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February-March.  Segments shall be numbered sequentially during the term of this Supply Agreement, commencing with Segment 1, which began April 2002, the first full Segment following the CNXT 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 CNXT Effective Date, as they may be modified from time to time by written agreement of the Parties, or if such technical specifications did not exist as of the CNXT 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.

 

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 Volume Commitment” is defined in Section 2.1(a) (Volume Commitments).

 

1.34         “WOPD” means a number of Wafers for which the fabrication process is completed at the Newport Beach Fab in a single day.

 

1.35         “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           Skyworks 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), Skyworks 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.

 

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(b)            Segments 1 Through 6.   During Segments 1 through 6:

 

(i)             Skyworks 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 Skyworks 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, Skyworks 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”):

 

(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/Skyworks orders the Wafer equivalent of [. . . *** . . .] WSPD for the Working Segment.  At the end of the Segment, Conexant/Skyworks purchases the Wafer equivalent of [. . . *** . . .] WSPD.  The Shortfall is the Wafer equivalent of [. . . *** . . .] WSPD.  Conexant/Skyworks 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/Skyworks orders the Wafer equivalent of [. . . *** . . .] WSPD for the Working Segment.  At the end of the Segment, Conexant/Skyworks purchases the Wafer equivalent of [. . . *** . . .] WSPD.  The Shortfall is the Wafer equivalent of [. . . *** . . .] WSPD.  Conexant/Skyworks pays [. . . *** . . .] on a Wafer equivalent of [. . . *** . . .] WSPD, and [. . . *** . . .] on the Wafer equivalent of [. . . *** . . .] WSPD.

 

(iii)          If, in any of Segments 1 through 6, Skyworks 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,

 

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prior to the end of Segment 6, purchases Wafers in excess of the Wafer Volume Commitment for the Working Segment, then Skyworks 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 Skyworks paid amounts pursuant to Section 2.1(b)(ii) , pro-rated to the time in question.  Skyworks 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:

 

(i)             Skyworks 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, Skyworks 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 CNXT 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), Skyworks 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 Skyworks 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” ), Skyworks 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” ), Skyworks 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” ), Skyworks 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, Skyworks will purchase such Wafers at the Basic Price.

 

(ii)            Specialty Wafers .  During Segments 1 through 12, Skyworks may submit its requirements for Specialty Wafers in excess of the Wafer Volume Commitment to

 

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Company, which, provided that it has sufficient Uncommitted Available Capacity, shall be obligated to produce such Wafers.  Skyworks shall purchase such Wafers at the Contract Price.

 

(e)            Surge Capacity .  At any time after Skyworks’ submission of a Purchase Order for any Working Segment, Skyworks 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 Skyworks 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 Skyworks a number of Commitment Surge Wafers equal to the lesser of (A) [. . . *** . . .] ; or (B) the equivalent of no more than [. . . *** . . .] WSPD.  Company will use commercially reasonable efforts to deliver the Commitment Surge Wafers as soon as possible.  Skyworks will pay the [. . . *** . . .] for all Commitment Surge Wafers.

 

(2)            Beyond Commitment Surge.   If Skyworks submits an Increase Notice with at least [. . . *** . . .] advance notice for additional Wafers that either (A)  [. . . *** . . .] ; or (B) represent the equivalent of more than [. . . *** . . .] WSPD ( “Additional Wafers” ), Company will use commercially reasonable efforts to fabricate and sell to Skyworks the number of Additional Wafers ordered by Skyworks.  Skyworks will pay [. . . *** . . .] for all Additional Wafers.

 

(ii)            After Segment 18.   After Segment 18, at any time after Skyworks’ submission of a Purchase Order for any Working Segment, Skyworks may submit an Increase Notice to Company.  If Company has Uncommitted Available Capacity, Company will fabricate and sell to Skyworks such additional Wafers, or as many as can be fabricated in light of the Uncommitted Available Capacity.  Skyworks will pay [. . . *** . . .] for all such additional Wafers purchased after Segment 18.

 

(f)             Cooperation .  Skyworks shall cooperate with Company in furtherance of the purposes hereof by timely furnishing all design information, Photomasks, specifications, intellectual property, and other items and information needed to fabricate the Wafers ordered by Skyworks, and by providing reasonable technical advice and assistance in such efforts.

 

(g)            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.  Skyworks’ payment of the foregoing amounts shall be Company’s sole and exclusive remedy, and Skyworks’ entire liability, for Skyworks’ 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.

 

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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 Skyworks’ request, Company will increase (and maintain for a period of time specified by Skyworks) 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, Skyworks 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 Skyworks contained in the latest Order Forecast, then Company will promptly notify Skyworks 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 Skyworks with written notice of its intent to terminate such Wafer process and shall cooperate with Skyworks on a transition plan with respect to Skyworks’ 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 Skyworks 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.

 

(d)            Closing of Newport Beach Fab.   Company shall notify Skyworks 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 Skyworks’ written approval on a transition plan to transfer the Wafer processing technologies requested by Skyworks to a foundry or foundries designated by Skyworks and specifically designed to ensure that there is no interruption in Skyworks’ 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 Skyworks-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.  Skyworks shall reimburse Company

 

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for the actual out-of-pocket expenses incurred by Company, and pre-approved by Skyworks, in transitioning such technology to the designated foundry or foundries. Skyworks 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 Skyworks, 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), Skyworks’ 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 Conexnat’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 Skyworks’ 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, Skyworks 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 Skyworks 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 Skyworks 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 Skyworks.  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 Skyworks, Skyworks 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, Skyworks will provide to Company a rolling forecast, covering a minimum period of [. . . *** . . .] of Skyworks’ expected order volumes for Wafers in the coming [. . . *** . . .] (the “Order Forecast” ).  The Order Forecasts are for planning purposes only and will not bind Skyworks or the Company in any respect.  No deviation of actual volumes from the forecasted volumes will relieve Skyworks or Company of their respective responsibilities and

 

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obligations under this Supply Agreement or affect the pricing established under this Supply Agreement.  Subject to the requirements of Section 2.1 (Skyworks Purchase Obligations), Skyworks 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), Skyworks 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.  Skyworks 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   Skyworks will submit [. . . *** . . .] Purchase Order Releases against outstanding Purchase Orders, to be submitted by close of business on the [. . . *** . . .] 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 Skyworks, price, delivery date, ship-to address, and other applicable information as determined by Skyworks.  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 Skyworks 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 Skyworks 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 Skyworks pursuant to Section 3.3(b) (Purchase Order Releases) above (the “Reserved SiGe Wafers” ), Company may notify Skyworks of the SiGe Order and require Skyworks to confirm that it will issue a Purchase Order Release for such Reserved SiGe Wafers.

 

(i)             If Skyworks 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 [. . . *** . . .].

 

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(ii)            If Skyworks confirms that it will issue a Purchase Order Release for the Reserved SiGe Wafers and later fails to do so, then Skyworks will pay to Company an amount equal to [. . . *** . . .] , up to the number of SiGe Wafers made unavailable due to Skyworks’ failure to cancel the unreleased Reserved SiGe Wafers.

 

(iii)          If Skyworks 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 Skyworks; 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 Skyworks 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