* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
EXHIBIT 10.20
FOUNDRY AGREEMENT FOR SHARE HOLDERS
This Foundry Agreement (this "Agreement") is made and entered into as
of December 11, 2000 by and between QuickLogic Corporation, a Delaware, USA
corporation having its principal place of business at 0000 Xxxxxxx Xxxxx,
Xxxxxxxxx, XX 00000, XXX ("CUSTOMER") and TOWER SEMICONDUCTOR LTD. an Israel
Corporation having its principal place of business at Ramat Xxxxxxx Xxxxxxxxxx
Xxxx, X.X. Xxx 000, Xxxxxx Xxxxxx 00000 XXXXXX ("TOWER").
WITNESSETH:
WHEREAS, CUSTOMER is a fabless semiconductor manufacturer and desires
to contract with a semiconductor manufacturer with the capability to supply
CUSTOMER with certain CUSTOMER designed products in wafer form in accordance
with CUSTOMER's design and product specifications;
WHEREAS, Tower is a manufacturer that sells silicon wafers containing
client designed integrated circuits to these clients, provides other
manufacturing and relating design and turn-key services, as well as
manufacturing process adaptation and customization to such clients; and
WHEREAS, TOWER plans to develop the capability of manufacturing certain
CUSTOMER designed products in sorted wafer form in the new Fab 2 it plans to
construct or such other locations agreed upon in writing by both parties, and
desires to manufacture and test such products for CUSTOMER in accordance with
CUSTOMER's design and product specifications;
WHEREAS, CUSTOMER desires to buy certain Products in Wafer form, or as
otherwise agreed to between the parties, from TOWER, and Customer is willing to
enter the Share Purchase Agreement between TOWER and CUSTOMER, dated December
11, 2000 in consideration
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
for TOWER's selling same to CUSTOMER pursuant to the terms and conditions set
forth below, including TOWER's obligations regarding Base Capacity and pricing
as defined herein;
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein, the parties hereto agree as follows:
1.0 DEFINITIONS
As used in this Agreement, the following terms shall have the following
respective meanings:
1.1 FAB 2 shall mean the new eight inch semiconductor manufacturing
facility contemplated in the Share Purchase Agreement, as defined in
Section 1.11.
1.2 MANUFACTURING PROCESS shall mean TOWER's 0.18 micron or smaller
geometries semiconductor manufacturing process and method to the
extent such process and method is required to be used in the
manufacture of Products for CUSTOMER under this Agreement.
1.3 MARKET PRICE for Wafers or sorted die (whichever is applicable) shall
mean the average foundry price for similar (feature size, number of
layers, size, technology, etc.) wafers or sorted die (whichever is
applicable) in other foundries.
1.4 NOTICE OF QUALIFICATION shall mean the receipt by TOWER of written
notice sent by CUSTOMER, followed by written acknowledgment and
concurrence by TOWER in which CUSTOMER states that TOWER has
satisfied the final qualification criteria set forth in Appendix I
hereto. Neither CUSTOMER nor TOWER shall withhold such Notice or
written acknowledgment for reasons not pertaining to product quality,
reliability or matters set forth in the qualification criteria.
Appendix I criteria shall be developed by the parties and added to
this Agreement as soon as practical following the execution hereof,
but prior to the start of production activities.
1.5 PRE-PRODUCTION WAFERS shall mean Wafers that are produced by TOWER
hereunder prior to the issuance by CUSTOMER of a Notice of
Qualification therefore and which may conform only to the electrical
parameters to be provided by CUSTOMER.
1.6 PRODUCTION WAFERS shall mean Wafers in sorted wafer form that are
manufactured in
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-2-
TOWER's Fab 2 and delivered to CUSTOMER after Notice of Qualification
and which conform to the manufacturing criteria set forth in Appendix
II. Appendix II criteria shall be developed by the parties and added
to this Agreement as soon as practical following the execution
hereof, but prior to the start of production activities.
1.7 PRODUCT shall mean a CUSTOMER's designed device, for which the
CUSTOMER has manufacturing rights, targeted for manufacture at TOWER
using a Tower Manufacturing Process and/or its derivatives.
1.8 RETICLE MASK SET shall mean the reticle masks required to produce a
fully functional Product.
1.9 CUSTOMER TECHNICAL INFORMATION shall mean any and all design rules,
electrical test structures, device designs, process knowledge,
process flow, test flow, test software, drawings, bills of materials,
specifications, data, descriptions and all other technical
information (including, without limitation, trade secrets, inventions
(whether or not patented or patentable) and know-how), all pertaining
to the Products or otherwise proprietary to CUSTOMER, including
CUSTOMER'S metal to metal amorphous silicon antifuse technology, and
ViaLink (R), and any such process or successor processes, and
improvements, that are disclosed to, jointly developed with or
provided by CUSTOMER to TOWER under this Agreement and which is
needed to be disclosed in order to manufacture the Wafers.
1.10 TOWER TECHNICAL INFORMATION shall mean any and all design rules,
electrical test structures, device designs, process knowledge,
process flow, test flow, test software, drawings, bills of materials,
specifications, data, descriptions and all other technical
information (including, without limitation, trade secrets, inventions
(whether or not patented or patentable) and know-how, or otherwise
proprietary to TOWER, including any such process or successor
processes and improvements that are disclosed to, jointly developed
with or provided by TOWER to CUSTOMER under this Agreement and which
is needed to be disclosed in order to manufacture the Wafers.
1.11 SHARE PURCHASE AGREEMENT, or SPA shall mean the Share Purchase
Agreement made as of July 4, 2000 by and between SanDisk Corporation
and Tower and incorporated by reference into the Share Purchase
Agreement made as of December 11, 2000 by and
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-3-
between CUSTOMER and TOWER. In the event the terms in the SPA, this
Agreement and/or the CUSTOMER SPA conflict, the terms of the CUSTOMER
SPA shall take precedence.
1.12 WAFER(S) shall mean an eight inch silicon wafer processed by TOWER in
Fab 2 and in accordance with specification agreed upon in this
Agreement, so that the processed wafer(s) will embody a Product.
Unless otherwise specifically mentioned herein wafers shall mean
wafer starts.
2.0 FABRICATION FACILITIES AND GENERAL SCOPE
2.1 TOWER shall fabricate at Fab 2 or at other locations agreed upon in
writing by both parties, Pre-Production Wafers and Production Wafers
ordered by CUSTOMER pursuant to this Agreement, and provided any such
third party location has entered into a written agreement containing
terms as least as restrictive as those stated herein, including but
not limited those regarding confidentiality and the restrictions on
use of CUSTOMER'S Technical Information. TOWER hereby represents and
warrants that the actual fabrication of all Wafers shall be performed
at its semiconductor facilities in Israel or such other locations
agreed upon in writing by both parties. *.
2.2 This Agreement does not constitute a forecast, purchase order or
release for the services set forth in Section 2.1. TOWER shall not
undertake or incur any expenses or perform any services or acts on
CUSTOMER's behalf except as specified in a release against a CUSTOMER
purchase order.
2.3 *.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-4-
2.4 All terms and conditions otherwise not dealt with in the body of this
Agreement shall be governed by Appendixes and Schedules, attached
hereto.
3.0 TERM AND TERMINATION
3.1 TERM OF THE AGREEMENT. This Agreement shall become effective on
the Closing Date, as that term is defined in the Share Purchase
Agreement, and shall expire * thereafter, unless earlier
terminated by one or both parties pursuant to the terms of this
Agreement. * prior to its termination, the parties will review
this Agreement in good faith and, if mutually agreed to by both
parties in writing, the term of this Agreement may be extended or
its scope expanded.
3.2 TERMINATION FOR DEFAULT. In the event that either party has committed
a material breach of this Agreement, the other party shall have the
right to terminate this Agreement if the party in breach fails to
cure such breach within * of written notice thereof.
3.3 In the event of termination, both parties shall be relieved from
their obligations under this Agreement except (i) for CUSTOMERS duty
to perform all payments due to Tower under this agreement, (ii) for
confidentiality under section 13.0, and (iii) Tower shall complete
any outstanding orders as of the date of termination and CUSTOMER
shall pay for such orders in accordance with the terms of this
Agreement, and (iv) for the parties obligations under section 11
(PATENTS AND OTHER PROPRIETARY RIGHTS).
4.0 PROCESS INTEGRATION
4.1 Promptly following execution of this Agreement, representatives of
TOWER and CUSTOMER will meet to establish definitive schedules and
staffing requirements for completing CUSTOMER's Product designs into
TOWER's CMOS process, as well as the necessary modifications as
defined for CUSTOMER's process, contemplated to be utilized in Fab 2.
In connection with such Product design and process customization,
CUSTOMER shall transfer CUSTOMER Technical Information described in
Appendix IV and TOWER shall transfer TOWER Technical Information.
Appendix IV criteria shall be mutually agreed upon by the parties and
added to this Agreement as soon as practical following the execution
hereof, but prior to the start of production activities.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-5-
4.2 CUSTOMER will provide all commercially reasonable design engineering
support at CUSTOMER's expense during the period of Product design and
pre-production. TOWER will be responsible for developing at its own
expense the Manufacturing Process(es) contemplated for use in Fab2.
4.3 TOWER will fabricate and provide Pre-Production Wafers to CUSTOMER at
CUSTOMER's expense, in such amounts and on the time schedule
specified in Appendix I and as amended from time-to-time by mutual
agreement of the parties. CUSTOMER will provide, at CUSTOMER's own
cost and expense, one (1) Reticle Mask Set, for each new Product to
be manufactured at Tower on behalf of CUSTOMER. TOWER shall replace
at its own cost and expense masks which must be replaced due to
process changes initiated by TOWER. CUSTOMER will replace at its cost
and expense masks which must be replaced due to process and/or design
changes initiated by CUSTOMER. Replacement production Reticle Mask
Sets for normal wear and tear shall be made by * at its own cost
and expense. All such Pre-Production Wafers are provided to CUSTOMER
"as-is" and TOWER makes no warranty what-so-ever relative to such
Pre-Production Wafers.
4.4 CUSTOMER shall have the right to order, at CUSTOMER's expense,
Pre-Production Wafers that meet the manufacturing acceptance
criteria in Appendix II, even though such wafers have not yet
passed CUSTOMER qualification. Subject to Section 6.3.1, the price
for such Pre-Production Wafers shall be *. Any purchase order for
such Pre-Production Wafers shall indicate that such order is for
Pre-Production Wafers that meet the manufacturing acceptance
criteria in Appendix II but for which a Notice of Qualification
has not yet been issued. If CUSTOMER orders such Pre-Production
Wafers, CUSTOMER shall have the right to reject only such
Pre-Production Wafers that do not meet the manufacturing
acceptance criteria in Appendix II, and CUSTOMER shall not be
obligated to pay for any such Pre-Production Wafers that are
rejected by CUSTOMER for such cause. Other than the above, all
such Pre-Production Wafers are provided to CUSTOMER "as-is" and
TOWER makes no warranty what-so-ever in relation to such
Pre-Production Wafers.
4.5 Each party shall appoint a technology project manager. Such managers
shall consult regularly to review the progress of the design and
implementation of the fabrication process for the Product and shall,
in good faith, attempt to jointly solve any problems that may arise
during the design and implementation phase. The initial manager for
TOWER shall be
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-6-
*. The initial manager for CUSTOMER shall be *.
4.6 *.
4.7 TOWER will be deemed to have successfully completed the design and
implementation phase of the fabrication process for the Product only
after all qualification tests have been successfully completed for
the Product pursuant to the qualification criteria set forth in
Appendix I, or once the Notice of Qualification for this Product has
been issued by CUSTOMER and acknowledged by TOWER.
4.8 TOWER will offer a version of the 0.18 micron process as specified in
CUSTOMER's SPA, Section 7.
5.0 PRODUCT FABRICATION
5.1 TOWER shall cause Production Wafers to be fabricated in accordance
with the integrated fabrication process developed pursuant to Section
4 above. Both parties acknowledge that such fabrication process may
be changed from time to time only upon the mutual written agreement
of TOWER and CUSTOMER, which agreement shall not be unreasonably
withheld. CUSTOMER and TOWER agree that if one party proposes a
change to such fabrication process to the other party, such other
party must approve or disapprove, in writing, of such proposed change
within * after receiving notification of such proposed change. *.
5.2 Appendix II shall be updated and revised, if necessary and as
mutually agreed upon by both parties, within thirty (30) days after
CUSTOMER's issuance of a Notice of Qualification for a Product as
well as mutually agreed to by the parties. Terms and Conditions of
Sales not specifically mentioned in this Agreement shall be governed
by the provisions of Appendix III hereto.
5.3 TOWER shall maintain records of all Production Wafers manufactured
for CUSTOMER
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-7-
for a period of *, after which, at CUSTOMER's prior written
request, TOWER will transfer such information to CUSTOMER. TOWER
shall provide Work in Process (WIP) reports to CUSTOMER *.
5.4 During the ramp-up period described in Business Plan agreed upon by
the parties as part of the Share Purchase Agreement, in Chapter 3,
Financial Plan, Version 11.00, the chart entitled FAB-2 FINANCIAL
ASSUMPTIONS - Base, PRODUCTION Plan, 1. CAPACITY PER MONTH ("INITIAL
RAMP-UP PERIOD"), and thereafter, TOWER shall make available to
CUSTOMER up to * of available wafers starts specified in said chart,
but TOWER is not committed to exceed * Wafer starts per month ("Base
Capacity"). The actual capacity referenced in said chart may be
changed and/or updated pursuant to Section 5.6, or 11.3 of the Share
Purchase Agreement. If CUSTOMER fails to exercise any of the Series
A-1 through A-5 Additional Purchase Obligations (the Mandatory
Additional Purchase Obligations) within the time periods specified in
the Share Purchase Agreement, including any applicable Grace Periods
(as defined in the Share Purchase Agreement), the Base Capacity shall
be reduced by * Wafers per month for each such Series A of the
Additional Purchase Obligations (the Mandatory Additional Purchase
Obligations) not so exercised. Notwithstanding the foregoing TOWER
may limit the month to month ramp up of the new fab and of new
processes to a mutually agreed upon number of wafers.
5.5 Subject to the volume restrictions imposed on CUSTOMER in Section
5.4, TOWER shall start the exact quantity of Production Wafers
ordered by CUSTOMER. CUSTOMER shall pay only for the total quantity
of Wafers delivered by TOWER and accepted in good faith by CUSTOMER.
The Parties acknowledge that actual capacity may be reduced as a
result of unexpected occurrences in excess of TOWER's normal planning
allowances, including by way of example and without limitation,
abnormal equipment down-time, abnormal process problems or events
such as those set forth in section 14 hereof. In addition, TOWER may
reduce actual capacity as a result of planned shutdowns to facilitate
process or equipment upgrades or for other reasonable purposes. In
all such cases, TOWER shall use commercially reasonable efforts to
restore capacity in the shortest practicable time. During such
periods, TOWER shall be entitled to reduce CUSTOMER's capacity by a
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-8-
percentage equal to the percentage reduction that occurs in TOWER's
aggregate capacity after all otherwise available slack capacity has
been taken up at the facility.
5.6 * months prior to the contemplated completion of the design and
implementation of the fabrication process for the first Products and
in each month, on the twenty-fifth day thereof, during the remaining
term of this Agreement, CUSTOMER shall provide TOWER with a * rolling
forecast of anticipated purchase orders for Products. The first *
months of each forecast will constitute a binding, firm purchase
order ("Firm Purchase Order"), subject to the rescheduling rights
described below. TOWER's acceptance, based on the provisions of this
Agreement, of each Firm Purchase Order or release hereunder shall be
communicated to CUSTOMER in writing within seven (7) business days of
its receipt thereof.
TOWER shall provide CUSTOMER with a response to each forecast within
seven (7) business days and a schedule of wafer delivery dates for
the first * months deliveries of Firm Purchase Orders within seven
(7) business days of its acceptance of a Firm Purchase Order or
release. Such schedule shall be updated by TOWER on *.
If TOWER fails to meet its delivery dates on * successive
deliveries by more than *, a senior officer of CUSTOMER will
discuss the cause of the delay with the CEO of TOWER and discuss
the means to correct the failures and TOWER shall take specific
steps to prevent similar events in the future, thus ensuring that
TOWER meets it commitments in the shortest possible time.
CUSTOMER may allocate certain of its capacity *.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-9-
If CUSTOMER's forecast falls below the Base Capacity per month, or as
a result of rescheduling actual Wafer consumption falls below the
Base Capacity per month, then TOWER may sell the unused portion of
CUSTOMER's capacity to other customers, provided *.
5.7 CUSTOMER may reschedule starts of Pre-Production Wafers and
Production Wafers, based on TOWER's schedule of wafer delivery dates
provided pursuant to Section 5.6, as indicated below:
5.7.1 *: No rescheduling of Wafers for the * of any forecast is
permitted.
5.7.2 *: Rescheduling of no more than * of the number of Wafers
scheduled in current forecast and no more than * of the number
of Wafers originally scheduled is permitted.
5.7.3 *: Rescheduling of no more than * of the number of Wafers
originally scheduled is permitted.
In no event may the number of Wafers for a given month fall below *
of the highest
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-10-
forecast given by CUSTOMER for that month.
In no event shall TOWER be committed to provide more than the Base
Capacity allocated to CUSTOMER. All increases in the number of wafers
ordered pursuant to Section 5.7.2 and 5.7.3 above will be subject to
TOWER's then current obligations to its customers.
The total number of Wafers ordered for a given process in a given
month may be rescheduled by CUSTOMER only once. However, at any time,
CUSTOMER may change by written notification to TOWER the mix of
Products utilizing the same manufacturing process, provided the
Wafers have not been started.
For the purpose of illustration, Appendix VI provides an example of
the forecasting schedule on a month to month basis.
Cycle times for Wafers shall be agreed upon by the parties, but
shall be competitive with industry standards for similar
technologies, with a current guideline of an average of *, to
become effective twelve (12) months after the start of the Initial
Ramp-Up Period. Once Wafer production begins, the parties intend
to conduct quarterly "business partner" meetings to monitor the
foundry relationship contemplated by this Agreement, and in these
meetings, cycle time status and/or improvement will be reviewed.
5.8 Each Wafer lot will be inspected by TOWER prior to shipment to ensure
compliance with the acceptance criteria set forth in Appendix II and
TOWER will include the resulting parametric and visual data with each
Wafer lot shipped to CUSTOMER. CUSTOMER may perform incoming
inspection of each Product Wafer lot to likewise ensure compliance
with the acceptance criteria set forth in Appendix II within thirty
(30) days after the delivery date of the Wafer lot. In the event any
Wafer is found to be incomplete or broken or fails the foregoing
inspection criteria, CUSTOMER shall have the right to reject such
Wafers within thirty (30) days after the delivery date thereof and
return such Wafers to TOWER for full credit or replacement at TOWER's
option.
5.9 CUSTOMER may, at its option, periodically utilize life test and other
mutually agreed upon reliability monitors to evaluate Products and/or
Production Wafers; the specific details of such monitors will be
mutually agreed upon in writing in advance and no later than such
time as CUSTOMER issues a Notice of Qualification for each Product.
If these
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-11-
tests and monitors indicate that TOWER's Manufacturing Process is not
meeting the required standards and criteria, TOWER will promptly
correct any such problems and CUSTOMER reserves the right to return
for full credit any Wafers manufactured under procedures that do not
satisfy such tests and monitors
5.10 No Wafers shall be returned to TOWER pursuant to this Agreement
without TOWER's prior written consent which shall not be unreasonably
withheld.
5.11 TOWER may choose to offer for sale to CUSTOMER at a reduced price
mutually agreed to by both parties in writing, any Production Wafers
rejected *.
5.12 TOWER, upon mutual agreement with CUSTOMER, will wafer probe all
or certain of the Products, pursuant to the requirements of
Appendix V and using the wafer sort programs provided by CUSTOMER,
and backgrind all Products to a mutually agreed upon industry
standard thickness, and in accordance with CUSTOMER
specifications, prior to shipment. Wafer probe price is *.
Backgrinding to thickness other than industry standard thickness
may be subject to additional costs, or subject to price
adjustments.
5.13 Masks requiring replacement due to normal wear and tear shall be
replaced by TOWER at its own cost and expense, provided that the
respective Product is continuing volume production at TOWER, and that
such Product has a current Notice of Qualification. Masks requiring
replacement due to CUSTOMER changes, amendments, bug fixing and the
like shall be borne solely by CUSTOMER. CUSTOMER may subcontract mask
making to TOWER, and TOWER may, in turn, subcontract mask making to a
subcontractor. At its discretion, TOWER may place masks of Products
not ordered by CUSTOMER for six (6) months or more in storage at
CUSTOMER's cost and expense. After twelve (12) months in storage, and
with three (3) months advanced notice to CUSTOMER, or if mask must be
replaced, TOWER may dispose of the mask pursuant to CUSTOMER's
written instructions, or if such were not provided by the end of such
three (3) months period, Tower will be free to discard the mask.
CUSTOMER's intellectual property rights in the masks, demonstrated by
the CUSTOMER's portions of the GDS2 representation, will be owned by
CUSTOMER. Any
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-12-
other intellectual property created or otherwise attached to the mask
shall be the sole property of TOWER and/or its respective owner.
5.14 TOWER may discontinue any of its Manufacturing Processes ("Obsolete
Process") provided that:
(a) Eighteen (18) months prior to the last planned production day
using such Obsolete Process CUSTOMER will be notified in
writing of TOWER's intent to discontinue the process; and
(b) Twelve to fifteen (12-15) months prior to the last planned
production day using such Obsolete Process CUSTOMER will have
the option to enter Life Time Purchase Orders ("LTPO") with
scheduled deliveries to extend over a twelve (12) months
period prior to the last planned production day using such
Obsolete Process; and
(c) Tower will produce Wafers under an LTPO in quantities not
exceeding the quantities to which TOWER is committed in
accordance with this Agreement. In special cases where
additional capacity may be necessary, the parties will
negotiate in good faith in attempt to achieve a mutually
acceptable production schedule.
6.0 PRICES AND PAYMENT
6.1 As long as CUSTOMER continues to own at least * shares of the
Ordinary Shares of TOWER (subject to adjustment for the events
listed in clauses (a) through (d) in Section 4.1.1 of the
Additional Purchase Obligation Agreement), the prices for up to
the first * Wafers purchased per month by CUSTOMER shall not
exceed *. The prices for Wafers in excess of * Wafers per month
shall not exceed *, or otherwise another price mutually agreed
upon by the parties.
All prices are Ex Works (as defined by Incoterms 2000) Tower's
manufacturing facility. Tower shall take care to ship Wafers in
industry standard packaging to protect Wafers in transit, and shall
be responsible for the loading of the Wafers on departure and will
bear the risks and costs of such loading.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-13-
CUSTOMER shall have the right, at its sole cost and expense, to have
an agreed upon independent certified public accountant conduct,
during normal business hours, with at least two weeks advanced
notice, and not more frequently than twice per year, an audit of the
appropriate records of TOWER to verify *.
6.2 All payments due to TOWER under this Agreement shall be payable in
United States Dollars specified in the applicable purchase order.
Payments will be made within * from date of invoice and transferred
using means of electronic transfer of funds to a bank or other
financial institution of TOWER'S choice.
6.3 The following Wafer return/credit agreement shall apply with respect
to Pre-Production and Production Wafers:
6.3.1 Pre-Production Wafers (based on 10 Representative lots, after
passing 500 hour card qualification and excluding Development
Wafers)
Wafer sort yield smaller than * % *
Wafer sort yield between * % and * % *
Wafer sort yield greater than * % *
6.3.2 Production Wafers
Wafer sort yield smaller than * % *
Wafer sort yield between * % and * % *
Wafer sort yield greater than * % *
6.3.3 If wafer sort is performed by CUSTOMER (or by CUSTOMER'S
agent) then TOWER shall issue CUSTOMER a Return Materials
Authorization for the affected wafers and/or issue a credit
memorandum to CUSTOMER in an amount calculated according to
the provisions of the Section 6.3, provided that notification
is provided to Tower within twenty one (21) days from Wafer
delivery. No adjustment shall be made if yield shortfall is
due principally to product design sensitivity or process
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-14-
sensitivity in CUSTOMER's control. To eliminate doubt CUSTOMER
will provide TOWER with sort results in a period of time no
longer than thirty (30) days, or otherwise CUSTOMER shall be
responsible for the full purchase price of such WIP that TOWER
could have avoided production thereof had it received the sort
results in a timely manner.
6.3.4 The Wafer return/credit agreement set forth in Section 6.3
shall apply to Wafers that have die areas of up to * cm2. The
return/credit provisions for Wafers having dies with areas
larger than * cm2 will be adjusted using the following
formula:
yield = *
where A is the die area in square inches and D is the defect
density per square inch, and shall be as follows:
Pre-Production Wafers (based on 10 Representative lots, after
passing 500 hour card qualification and excluding Development
Wafers):
Average defect density greater than * *
Average defect density between * and * *
Average defect density lower than * *
Production Wafers:
Average defect density greater than * *
Average defect density between * and * *
Average defect density lower than * *
However, if yield is lower due to specific nature of
CUSTOMER's unique process and/or design then the necessary
adjustments to the formulas shall be made.
6.4 Notwithstanding Section 6.3, TOWER shall credit the order value of
any order placed hereunder by 15%, by applying funds, to the extent
funds remain in CUSTOMER'S Prepaid Wafer Account as described in
Schedule 6.4, attached hereto and made a part hereof, against such
order. TOWER'S invoice shall reflect the amount of the credit and
indicate the use of funds from CUSTOMER'S Prepaid Wafer Account. The
provision of this Section 6.4 shall apply solely to those Wafers
ordered by CUSTOMER.
6.5 Prices, other than for Wafers, for goods and services, including but
not limited to mask
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-15-
reticles (as contemplated in this Agreement), Wafer probe, probe
cards, probe program development, mask storage, which are provided by
TOWER, shall be agreed upon in advance and in writing between the
parties.
6.6 *.
7.0 TAXES
All quoted prices are exclusive of any present or future sales or use tax,
revenue or value-added tax, import duty (including brokerage fees) or any
other tax or charge applicable to the manufacture, sale or delivery of any
Product. Such taxes and charges, when applicable, shall be paid by
CUSTOMER, or immediately reimbursed to TOWER upon delivery of an invoice
for same if applicable law requires TOWER to collect and remit such taxes
or charges to relevant authorities. Not withstanding the foregoing taxes
which are directly imposed on TOWER, such as income tax, shall be borne by
TOWER.
8.0 TITLE AND RISK OF LOSS
Title and risk of loss and damage to Production Wafers purchased by
CUSTOMER shall vest in CUSTOMER when the Products have been delivered, ex
works Tower's manufacturing facility. All Wafers to be delivered to
CUSTOMER under this Agreement shall be packed, marked and shipped by TOWER
according to current industry standard practices and care for
transportation of Wafers of a similar type, unless otherwise specified by
CUSTOMER. Deliveries of Wafers will be accompanied by the following
information, as appropriate: (i) purchase order number, (ii) product type,
(iii) lot number, (iv) number of Wafers, (v) the inspection results
described in Section 5.8, and any other test or process information to be
mutually agreed upon in writing by both parties. CUSTOMER shall be solely
responsible for filing any claims for damage during shipment with the
carrier.
9.0 WARRANTY
9.1 TOWER hereby warrants to CUSTOMER that Production Wafers supplied
hereunder shall be free from defects in material and workmanship,
other than normal manufacturing yield loss, and shall conform in all
material respects to the specifications set forth in Appendix II
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-16-
and shall have been manufactured pursuant to the Manufacturing
Process qualified under Appendix I, for a period of * from the date
of acceptance by CUSTOMER (the "Warranty Period"). The foregoing
warranty does not apply to (a) any Product which has been subject to
misuse, neglect, accident, or modification or which has been altered
and therefore are not capable of being tested by Tower under its
normal test conditions, (b) non-conformities which result from
CUSTOMER's design or process or which result from testing procedures
not previously agreed in writing by TOWER, or (c) any Products that
are intended to be prototypes, risk production or engineering
products. TOWER's sole obligation, and CUSTOMER's sole remedy
hereunder for Products failing to meet the aforesaid warranty shall
be, at TOWER's discretion, to replace the nonconforming Products or
issue CUSTOMER a credit for the purchase price of the nonconforming
Products, where within the warranty period: 1) TOWER has received
written notice of any nonconformity; 2) after TOWER's written
authorization to do so (represented by an RMA, which shall not be
unreasonably withheld) CUSTOMER has returned the nonconforming
Products to TOWER, freight prepaid; and 3) TOWER determines that the
Products are nonconforming. Any replacement Products shall be subject
to the foregoing warranty for only the unexpired term of the warranty
with respect to the original nonconforming Products and shall be
delivered to CUSTOMER, freight pre-paid by TOWER. TOWER warrants that
Products sold hereunder shall at the time of delivery be free and
clear of liens and encumbrances. THIS WARRANTY EXTENDS TO CUSTOMER
AND ITS AFFILIATES ONLY AND TOWER SHALL HAVE NO OBLIGATION TO ACCEPT
WARRANTY RETURNS DIRECTLY FROM CUSTOMER'S CUSTOMERS OR ANY OTHER
USERS OF CUSTOMER'S PRODUCTS NOR WILL IT BEAR ANY OBLIGATION OR
LIABILITY TO SUCH CUSTOMER'S CUSTOMERS WHATSOEVER. THIS WARRANTY IS
IN LIEU OF ALL OTHER WARRANTIES WHETHER EXPRESS, IMPLIED OR STATUTORY
INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR
PARTICULAR PURPOSE. IN NO EVENT SHALL TOWER BE LIABLE FOR ANY
INDIRECT, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES DUE TO BREACH
OF THIS WARRANTY OR ANY OTHER LIABILITY ARISING UNDER THIS AGREEMENT
EVEN IF TOWER HAS BEEN ADVISED OF THE POSSIBILITY OF SAME. TOWER'S
TOTAL LIABILITY FOR ALL CLAIMS ARISING UNDER THIS SECTION 9.1,
REGARDLESS OF THE LEGAL THEORY FOR SAME, SHALL BE LIMITED TO THE
TOTAL AMOUNTS ACTUALLY PAID TO TOWER BY CUSTOMER FOR PRODUCTS
PURCHASED HEREUNDER DURING THE
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-17-
PRECEDING *, AND CUSTOMER SHALL INDEMNIFY AND HOLD TOWER HARMLESS
FROM ANY ADDITIONAL WARRANTY CLAIMS REGARDLESS OF WHETHER SUCH WERE
PUT FORTH BY CUSTOMER OR CUSTOMER'S CUSTOMER, OR OTHERWISE BY ANY
THIRD PARTY.
*.
9.2 CUSTOMER acknowledges that Pre-Production Wafers provided to
CUSTOMER, pursuant to the terms of Section 4.3 and 4.4, are not
covered by this warranty and are sold "as is" and with all faults and
without warranties either express or implied, unless specifically
noted in the respective Sections 4.3 and 4.4 above.
9.3 LIFE SUPPORT POLICY. TOWER does not authorize, endorse, certify or
recommend the Products and/or Wafers for use as a critical component
in life support devices or systems (as defined herein) without the
express written permission of the chief executive officer of TOWER.
For these purposes, "life support devices or systems" are devices or
systems which (a) are intended for the surgical implant into the
human body or (b) support or sustain human life, and whose failure to
perform can be reasonably expected to result in a significant injury
to or death of the human subject, and a "critical component" is any
component of a life support device or system whose failure to perform
can be reasonably expected to cause the failure of the life support
device or system, or to affect its safety or effectiveness. CUSTOMER
shall notify its customers that the Products are not intended for
such use and that its customer assumes all risk associated with such
use, and shall fully indemnify TOWER from any claims resulting of
such unauthorized use.
10.0 LICENSE GRANTS
10.1 CUSTOMER hereby grants to TOWER a nonexclusive, nontransferable,
royalty-free, worldwide license to use the CUSTOMER Technical
Information, and all improvements thereof, solely for the purpose of
fabricating Wafers for CUSTOMER pursuant to the terms of this
Agreement. However, TOWER may use improvements to its Manufacturing
Process for the benefit of other customers without entitling CUSTOMER
to any right or compensation from TOWER or TOWER'S customers, except
to the extent such
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-18-
improvements are used with any process step that forms a
metal-to-metal antifuse. CUSTOMER agrees not to file any suit, claim,
action or other proceeding against TOWER for infringement or
violation of CUSTOMER's intellectual property rights for anything
included in TOWER's Manufacturing Process or designs provided to
CUSTOMER by TOWER.
10.2 TOWER hereby grants CUSTOMER * a non-exclusive, non-transferable,
royalty free, worldwide license to use, only for the sale and
distribution by CUSTOMER *, and their authorized agents, of
CUSTOMER's * products, including components thereof manufactured
by TOWER, TOWER's patents used for the manufacture of the Wafers for
CUSTOMER *, but solely for products manufactured by TOWER.
10.3 In the event CUSTOMER is or becomes a party to a separate agreement
with a third party and such agreement grants to CUSTOMER certain
"have-made" rights under such third party's patents or otherwise
other intellectual property (collectively "IP"), and in the event
that activity performed by TOWER to provide any Production Wafers to
CUSTOMER infringes such third party's IP and such IP are covered
under such "have-made" rights granted to CUSTOMER by the third party,
then CUSTOMER shall exercise its "have made" rights for the benefit
of TOWER, provided that such exercise is permitted under the relevant
"have made" rights.
10.4 In the event TOWER is or becomes a party to a separate agreement with
a third party and such agreement grants to TOWER certain rights to
manufacture products under such third party's IP, and in the event
that any activity performed by TOWER to provide any Production Wafers
to CUSTOMER hereunder infringes such third party's IP and such IP are
covered under such manufacturing rights granted to TOWER by the third
party, then TOWER shall exercise its manufacturing rights for the
benefit of CUSTOMER, provided that such exercise is permitted under
the relevant "have made" rights.
11.0 PATENTS AND OTHER PROPRIETARY RIGHTS
11.1 The parties agree to abide by the terms of this Section 11.1 in the
event there is any claim, liability or suit (or notice of any of the
foregoing) brought against TOWER and/or
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-19-
CUSTOMER alleging: (i) that either party's or both parties' use of or
compliance with any design, specification, process or method
contained in CUSTOMER's Technical Information infringes any United
States or foreign patent, trade secrets, copyright, mask work or
other third party intellectual property right and/or (ii) that the
Manufacturing Process or any proprietary information of TOWER related
to the Manufacturing Process (including, without limitation,
manufacturing drawings, bills of materials, specifications, data,
descriptions and all other technical information, trade secrets,
inventions (whether or not patentable) and know-how) infringes any
United States or foreign patent, trade secrets, copyright, mask work
or other third party intellectual property right.
(a) Each party shall promptly notify the other of any notice of a
claim of infringement as described above. If a claim of
infringement is brought against either party, both parties
shall promptly meet, confer and cooperate with each other in
good faith to resolve such claim on terms mutually agreeable
to both parties; each party shall bear its own costs and
expenses related thereto, except as covered in subparagraphs
(b), (d), (e), (f) and (g) of this Section 11.1.
(b) If a claim of infringement is brought against both TOWER and
CUSTOMER with respect to the Tower Technical Information
and/or the CUSTOMER Technical Information and/or the
Manufacturing Process, the parties shall promptly meet, confer
and cooperate with each other in good faith to mutually agree
on joint representation in connection with such claim. In the
event the parties agree upon joint representation, all costs
and expenses (including reasonable attorneys' fees) related to
such joint representation shall be shared equally between
TOWER and CUSTOMER. If, after conferring with each other in
good faith, the parties are unable to agree upon joint
representation, each party shall be free to retain its own
attorney; in such event, each party shall bear its own costs
and expenses (including attorneys' fees) related to such
individual representation, except as covered in subparagraphs
(d), (e), (f) and (g) of this Section 11.1. In any event,
whether the parties are jointly represented or individually
represented, both parties shall reasonably cooperate with each
other in good faith in defending and settling such claim of
infringement and shall not settle such claim in a manner
impacting the rights and obligations of the other party
without the prior written consent of the other.
(c) If a claim of infringement is brought against either or both
parties and a final non-
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-20-
appealable court order restricts the use of the allegedly
infringing Tower Technical Information and/or Customer
Technical Information and/or Manufacturing Process, CUSTOMER
and TOWER agree that, to the extent reasonably possible on
reasonable terms and conditions, they will either (i) procure,
from the third party that has given notice of the claim, the
right to continue using the allegedly infringing TOWER
Technical Information and/or CUSTOMER Technical Information
and/or Manufacturing Process (to the extent reasonably
possible on reasonable terms and conditions, each party will
use its respective patent and license portfolios in an effort
to accomplish such procurement) or (ii) modify the allegedly
infringing TOWER Technical Information and/or CUSTOMER
Technical Information or Manufacturing Process to make it
non-infringing. In the event the parties cannot accomplish
either of the foregoing within ninety (90) days of such court
order, each party shall have the right to terminate this
Agreement with respect to the Product(s) subject to third
party claims and any such termination shall be effective
against both parties.
(d) If a claim of infringement is brought against CUSTOMER alone
with respect to the CUSTOMER Technical Information, or if the
parties choose to defend claims separately, and CUSTOMER is
required to pay attorneys' fees, damages, or a monetary
settlement amount (whether in a lump sum, through royalty
payments, or otherwise) with respect thereto, the parties
agree that CUSTOMER shall bear 100% of such attorneys' fees,
damages, or settlement payment and shall not be entitled to
any indemnification from TOWER.
(e) If a claim of infringement is brought against TOWER alone with
respect to the Manufacturing Process and/or TOWER Technical
Information, or if the parties choose to defend claims
separately, and TOWER is required to pay attorneys' fees,
damages, or a monetary settlement amount (whether in a lump
sum, through royalty payments, or otherwise) with respect
thereto, the parties agree that TOWER shall bear 100% of such
attorneys' fees, damages, or settlement payment and shall not
be entitled to any indemnification from CUSTOMER.
(f) If a claim of infringement is brought against both CUSTOMER
and TOWER and the parties have agreed upon joint
representation in the defense thereof in accordance with
subparagraph (b) above and the parties are required to pay
attorneys' fees, damages, or a settlement amount (provided,
however, such settlement was mutually agreed upon by
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-21-
both parties), the parties agree that such attorneys' fees,
damages, or settlement amount shall be split equally between
TOWER and CUSTOMER, unless otherwise agreed in writing.
(g) For avoidance of doubt, the parties agree that:
(i) Claims brought against TOWER due to any infringement
resulting from: (1) CUSTOMER Technical Information, or;
(2) the combination of CUSTOMER Technical Information
with the Manufacturing Process and/or Tower Technical
Information, shall be the sole responsibility of CUSTOMER
which shall indemnify and hold TOWER harmless against all
such claims, including also all reasonable cost and
expenses deriving thereof; and
(ii) Claims brought against Customer due to an infringement
caused solely by TOWER Technical Information or
Manufacturing Process, shall be the responsibility of
TOWER which shall indemnify and hold CUSTOMER harmless
against such claims, including also all reasonable cost
and expenses deriving thereof.
11.2 The foregoing states the entire liability of the parties for
infringement, provided however, that the total liability for either
party under this provision shall not exceed the total sales of TOWER
to CUSTOMER over a period of * immediately preceding such
infringement claim.
11.3 All ideas, designs, methods, processes and inventions conceived
solely by personnel of one party while such personnel are engaged in
performance of this Agreement, and patents, copyrights, mask works
and other intellectual property rights arising therefrom, shall be
owned solely by such party, except that each party shall own and
shall retain all rights, title and interest in its respective
technical information (CUSTOMER for CUSTOMER Technical Information
and TOWER for TOWER Technical Information), and any modifications
thereto. All intellectual property rights in the Confidential
Information of a party shall remain the property of such party.
11.4 All ideas, designs, methods, processes and inventions conceived
jointly by personnel of both parties while such personnel are engaged
in performance of this Agreement, and patents, copyrights, mask works
and other intellectual property rights arising therefrom, shall be
equally owned by both parties, except that each party own and shall
retain all rights, title and interest in its respective technical
information (CUSTOMER for
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-22-
CUSTOMER'S Technical Information and TOWER for TOWER Technical
Information), and any modifications thereto. All intellectual
property rights in the Confidential Information of a party shall
remain the property of such party.
12.0 TRADEMARKS
Neither party will, without the prior written consent of the other
party, use in advertising, publicity, or otherwise any trade name,
trademark, trade device, service xxxx, symbol or any other
identification or any abbreviation, contraction or simulation thereof
owned or used by the other party. CUSTOMER may use TOWER's MICROFLASH
trademark accompanied by an industry customary footnote as follows:
"MICROFLASH(R) is a trademark of Tower Semiconductor Ltd, for the
N-ROM(TM) Technology licensed from Saifun Semiconductors Ltd.". Tower
may reasonably change from time to time the content of such footnote.
13.0 CONFIDENTIALITY OBLIGATIONS
13.1 CONFIDENTIAL INFORMATION: As used in this Agreement ("Confidential
Information") shall mean: (i) all information related to Production
Wafers fabricated by TOWER for CUSTOMER hereunder; (ii) CUSTOMER
Technical Information; (iii) TOWER Technical Information, (iv) this
Agreement and (v) all other information disclosed by one party to the
other pursuant to this Agreement which is written, graphic, machine
readable or in other tangible form or, subject to Section 13.3 below,
intangible form.
13.2 The parties shall not use or disclose Confidential Information except
as herein provided. Each party agrees to keep the Confidential
Information disclosed to it by the other party confidential and to
use or disclose it only for the purposes described herein, for seven
(7) years from each disclosure of the Confidential Information,
except as the other party may otherwise agree in writing.
13.3 Each party's obligation to keep the Confidential Information
confidential shall extend only to the Confidential Information which
is at the time of disclosure conspicuously labeled as "Confidential"
or "Proprietary" (or other similar marking to indicate its
confidential nature) belonging to the other party. If the
Confidential Information is disclosed orally or through
demonstration, it must be specifically designated as proprietary or
confidential information at the time of the oral disclosure and
confirmed in a writing to be received by
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-23-
the party to which the Confidential Information is disclosed within
thirty (30) days after the oral disclosure. Such written confirmation
shall set forth in detail the Confidential Information to be kept
confidential.
13.4 Each party will use at least the same degree of care in keeping the
Confidential Information of the other party confidential as it uses
for its own proprietary or confidential information of a similar
nature, including but not limited to jointly developed Confidential
Information disclosed to a third party in compliance with the
provisions of this Agreement. Each party further agrees to refrain
from reverse engineering, or otherwise analyzing for the purpose of
copying, each other's Confidential Information.
13.5 Subject to the restrictions imposed by law, the obligation of the
party to which the Confidential Information is disclosed under this
Agreement shall not extend to any Confidential Information that:
(a) was in the public domain at the time it was disclosed;
(b) was known to that party at the time of its disclosure,
provided that it can be evidenced by that party's records in
existence prior to the disclosure;
(c) was independently developed by that party or one of the group
companies of that party by employees of that party or group of
companies of that party who have had no possession or access
to such Confidential Information, provided that it can be
evidenced by that party's records in existence prior to the
disclosure;
(d) becomes part of the public domain after disclosure (through no
improper action or inaction of that party);
(e) is disclosed by the other party to a third party without
restrictions on such third party's rights to disclose or use
the same; or
(f) is disclosed after receipt of a party's written notification
that it will not accept any further Confidential Information
in confidence; or
(g) subject to Section 13.4 above, the disclosure of jointly
developed Confidential Information.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-24-
14.0 FORCE MAJEURE
Neither party hereto shall be liable in any manner for failure or delay in
fulfillment of all or part of this Agreement directly or indirectly owing
to any causes or circumstances beyond its reasonable control, including,
but not limited to, acts of God, governmental orders or restrictions, war,
war-like conditions, sanctions, strikes, revolution, riot, plague, or other
epidemics, fire and flood; provided, however, that nothing under this
Section 14 shall relieve either party of its obligations to make any
payment required under this Agreement.
15.0 INCIDENTAL, CONSEQUENTIAL DAMAGES
No party shall be liable to the other for any incidental, indirect, special
or consequential damages, or for lost profits, savings or revenues of any
kind, whether or not there has been notification of possibility of such
damages. CUSTOMER undertakes that TOWER shall not be liable to CUSTOMER's
customers for any incidental, indirect, special or consequential damages,
or for lost profits, savings or revenues of any kind, whether or not there
has been notification of possibility of such damages, and CUSTOMER shall
indemnify and hold TOWER harmless if such is brought against TOWER.
If CUSTOMER's customer has a direct relationship with Tower, as
contemplated in Section 2.3, then the provisions included in the agreement
between Tower and such CUSTOMER's customer shall exclusively apply.
16.0 NOTICES
All notices, demands or consents required or permitted hereunder shall be
in writing and shall be delivered, sent by telegram, telex, or facsimile,
or mailed by registered mail to the respective parties at the addresses set
forth below or at such other address as shall have been given to the other
party in writing for the purposes of the clause. Such notices and other
communications shall be deemed effective upon the earliest to occur of:
(a) actual delivery;
(b) seven (7) business days after mailing, addressed and postage prepaid;
return receipt requested, or
(c) three (3) business days after transmission by fax with printed
confirmation of fax
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-25-
transmission.
Notices shall be given:
To CUSTOMER:
QuickLogic Corp.
0000 Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
XXX
Attention: President
Tel: 000-000-0000
Fax: 000-000-0000
To TOWER:
TOWER SEMICONDUCTOR LTD.
Ramat Gavriel Industrial Xxxx
X.X. Xxx 000
Xxxxxx Xxxxxx 00000
XXXXXX
Attention: Vice President Marketing and Sales
Tel: x000-0-000-0000
Fax: x000-0-000-0000
17.0 WAIVER AND AMENDMENT
No waiver of any right under this agreement shall be effective unless in
writing and signed by the party against whom such waiver is sought to be
enforced. No failure or delay by either party in exercising any right,
power, or remedy hereunder shall operate as a waiver of any such right,
power or remedy.
18.0 ASSIGNMENT
Except as otherwise provided herein, neither party shall assign or in any
way transfer any rights or obligations hereunder without the prior written
consent of the other party, and such consent shall not be unreasonably
withheld, and any attempted assignment or transfer without such consent
shall be void and without effect; except that either party hereto may
assign this Agreement to any person or entity acquiring all or
substantially all of its business, assets or stock.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-26-
19.0 ARBITRATION
19.1 In the event that any dispute or disagreement between the parties as
to this Agreement shall arise, and such cannot be resolved by the
Project Managers, prior to taking any other action, the matter shall
be referred to responsible executives of the parties for
consideration and resolution. Any party may commence such proceedings
by delivering a written request to the other party for a meeting of
such responsible executives. The other party shall be required to set
a date for the meeting to be held within thirty (30) days after
receipt of such request and the parties agree to exercise their best
efforts to settle the matter amicably. All meetings shall be held at
a location mutually agreed upon by both parties.
19.2 If any dispute or disagreement is not settled within sixty (60) days
from the initial meeting pursuant to Section 19.1 of this Agreement,
such dispute or disagreement may, at the demand of any party, be
submitted to arbitration by a panel of three (3) arbitrators
knowledgeable in the area of the issues to be resolved and chosen
pursuant to the Rules of Arbitration of the International Chamber of
Commerce, unless the parties mutually agree otherwise in writing.
Disputes under this provision shall be governed by the Rules of
Arbitration of the International Chamber of Commerce then in effect.
All proceedings before the arbitrators shall be conducted in the
English language and shall be held in San Francisco, California,
U.S.A.
19.3 Each party will share equally in the costs and expenses of
arbitration unless the arbitrators find that the position of the
non-prevailing party or parties in such arbitration was frivolous, in
which event the arbitrators may assess all of such costs and expenses
together with reasonable attorneys' fees against the non-prevailing
party or parties.
19.4 The decision of the arbitrators pursuant to this Section 19 shall be
final and shall be conclusive and binding on all parties.
20.0 GOVERNING LAW
This Agreement and matters connected with the performance hereof shall be
construed, interpreted, applied and governed in all respects in accordance
with the laws of the State of California, without regard to conflicts of
laws provisions thereof and without regard to the United
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-27-
Nations Convention on Contracts for the International Sale of Goods.
21.0 INTEGRATION
This Agreement, including all attached Schedules and Appendices,
constitutes the final, complete and exclusive agreement of the parties
concerning the subject matter contained herein, and supersedes all prior
agreements and understanding, whether written or oral, between the parties
related thereto. This Agreement may not be modified in any respect except
in a writing which states the modification and is signed by both parties
hereto.
22.0 SEVERABILITY
In the event that any provision of this Agreement shall be held to be
unenforceable or illegal, such provision shall be deemed modified or, if
necessary, deleted to the extent necessary so that the entire Agreement
shall not fail, but shall continue in force and effect. In such event, the
parties shall in good faith negotiate to replace such illegal or
unenforceable provision with enforceable and legal provisions which will,
in effect, most nearly and fairly accomplish the effect of the illegal or
unenforceable provision, if possible.
23.0 EXPORT CONTROL
The parties hereto understand and recognize that the materials and
information made available to them hereunder and the product(s) produced
through use thereof may be subject to the Export Administration Regulations
of the United States Department of Commerce and other United States
government regulations. The parties are familiar with and agree to comply
with all such regulations, including any future modifications thereof.
24.0 RIGHTS AND REMEDIES CUMULATIVE
The rights and remedies herein provided shall be cumulative and not
exclusive of any other rights or remedies provided by law or otherwise.
25.0 HEADINGS
The headings of the various sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be a part of
this Agreement.
26.0 COUNTERPARTS
This Agreement may be executed in any number of counterparts, and each such
counterpart
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-28-
hereof shall be deemed to be an original instrument, but all such
counterparts together shall constitute one Agreement.
27.0 PUBLIC ANNOUNCEMENTS
Neither party shall publicly announce the execution and existence of this
Agreement without first submitting the text of such public announcement to
the other party and receiving the approval of the other party of such text
(which approval shall not be unreasonably withheld), except that approval
of the other party shall not be necessary when public disclosure is
required by law or generally accepted accounting principles.
28.0 INDEPENDENT CONTRACTORS
Each Party is an independent contractor of the other and neither shall be
deemed an employee, agent, partner or joint venture of the other. Neither
party shall make any commitment, by contract or otherwise, binding upon the
other nor represent that it has any authority to do so.
29.0 TOWER IS A FOUNDRY
TOWER is a Semiconductor Contract Manufacturer ("SCM" or "Foundry") that
provides manufacturing services based on its manufacturing processes to
other third party clients, some of which may be competitors of CUSTOMER.
TOWER may use all its Manufacturing Processes, without any restrictions or
limitations, subject to the terms of this Agreement, including Section
10.1(a), and subject to the terms and conditions of its agreements with the
licensors of Tower's manufacturing processes. Subject to the aforementioned
limitations and the terms of this Agreement, including Section 10.1(a),
Tower may also use processes based on its core processes with modifications
proposed or specified by the CUSTOMER and/or a third party client, with no
restrictions or limitations.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-29-
IN WITNESS WHEREOF, the parties have caused this Foundry Agreement to be
executed in their respective corporate names by their duly authorized
representatives on the date first written above.
CUSTOMER TOWER SEMICONDUCTOR LTD.
By:________________________________ By:________________________________
E. Xxxxxx Xxxx Dr. Yoav Nissan-Xxxxx
President and CEO Co-CEO
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-30-
APPENDIX I
QUALIFICATION CRITERIA
To Be Added.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-31-
APPENDIX II
MANUFACTURING AND ACCEPTANCE CRITERIA
To Be Added.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-32-
APPENDIX III
STANDARD TERMS AND CONDITIONS OF SALE
1. SCOPE. The terms and conditions of sale contained herein apply to all
quotations and offers made by Tower Semiconductor Ltd. ("Tower"), including
all Purchase Orders ("POs") accepted by Tower for the manufacture and sale
of Tower wafers, die, as well as other goods or services (the "GOODS").
These terms and conditions may in some instances conflict with some of the
terms and conditions affixed to the POs or other procurement documents
issued by a Tower customer ("Customer") ordering GOODS. In the case of any
such conflict, the terms and conditions herein shall govern, and acceptance
of Customer's order is expressly conditioned upon Customer's acceptance of
these terms and conditions whether by Customer's written acknowledgment, by
implication, or by its acceptance and payment of GOODS ordered hereunder.
Tower's failure to object to conflicting terms and conditions affixed to any
POs or other communication from Customer shall not be deemed a waiver of
these terms and conditions. Notwithstanding the foregoing, if any term or
condition herein conflicts with terms or conditions of the Agreement, the
terms and conditions of the Agreement shall apply. Any modification of these
terms and conditions must be agreed to in a writing signed by eligible
officers of each party.
2. PAYMENT - TERMS. All prices quoted shall be Ex-works (as defined by
Incoterms 2000) (at the wafer production facility set forth in paragraph 4
below). Payment for GOODS due to Tower shall be * from date of invoice.
All payments shall be in United States dollars, unless otherwise agreed in
writing, and shall be electronically transferred to a bank or other
financial institution of Tower's choice. Unless expressly waived by Tower,
late payments will bear interest at the lesser of the three months LIBOR
rate plus two percent, or the maximum rate allowed by applicable law. If
Tower determines that it is necessary to bring legal action to collect
delinquent accounts, Customer will pay or reimburse Tower for the reasonable
costs of suit, collection and attorney's fees. In addition, upon
delinquency, or if Tower has reason to doubt the creditworthiness of
Customer, Tower at its sole discretion, may delay delivery of GOODS, cancel
outstanding orders, reduce amounts, deliver C.O.D., require Customer to post
an appropriate letter of credit, Bank Guarantee or any other security,
and/or seek to enforce any of Tower's other available legal remedies. Tower
shall retain a security interest and right of possession in the GOODS until
Customer makes full payment.
3. TAXES. All quoted prices are exclusive of any present or future sales or use
tax, revenue or value-added tax, import duty (including brokerage fees) or
any other tax or charge applicable to the manufacture, sale or delivery of
any GOODS. Such taxes and charges, when applicable, shall be paid by
Customer, or immediately reimbursed to Tower upon delivery of an invoice for
same if applicable law requires Tower to collect and remit such taxes or
charges to relevant authorities.
4. DELIVERY. Sales of GOODS shall be Ex-works (Tower's Xxxxxx Ha'xxxx,
Israel facility or at such other Tower wafer production facility mutually
agreed upon). Customer shall acknowledge to Tower the receipt of each
delivery of GOODS stating quantity, type, and damages (if any) existing
at delivery, within * following delivery of GOODS. Tower shall not be
responsible for any claims relative to quantity and type made after such
* period. On-time delivery shall be deemed to be any delivery made to
Customer within the period of * prior to until * after the scheduled
delivery date, or as agreed in writing. However, shipping up to
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-33-
* ahead of delivery schedule is authorized. Tower shall use its
commercially reasonable efforts to meet Customer's delivery schedules.
Delivery schedule changes on existing POs may be made by mutual agreement
of Tower and Customer. Tower reserves the right to make deliveries of
GOODS in installments and these terms and conditions shall be severable
with respect to such installments. Delivery delay or default of any
installment shall not relieve Customer of its obligation to accept and
pay for remaining deliveries of GOODS.
5. ACCEPTANCE.
a) Customer shall accept GOODS or reject them as nonconforming within *
of receipt of each delivery. Failure to notify Tower in writing of
nonconforming GOODS within such period shall be deemed an
unconditional acceptance.
b) The determination of conformity will be based solely on final electrical
testing to be conducted using Tower's Electrical Test Specifications
(ETS) procedures and the yield guarantees agreed upon in writing between
Tower and Customer. Should the GOODS meet or exceed the criteria of the
electrical testing and yield, Customer will not be allowed to reject
GOODS. To reject GOODS Customer must request a return material
authorization ("RMA") from Tower. Customer may ship the rejected GOODS to
Tower only after receiving an RMA. Customer shall bear all risk of loss,
damage, or destruction to the GOODS rejected by Customer until same are
returned to Tower (either hereunder or under GENERAL WARRANTY). Tower
will retest the GOODS and if they fail, Tower will either credit Customer
for the price of the GOODS or replace same with conforming GOODS.
c) To prevent splitting of production lots of GOODS that are wafers,
Customer agrees to purchase an over-shipment of up to a full lot size
minus one wafers, or the equivalent number of die or packaged die.
6. INTELLECTUAL PROPERTY. All patent rights, copyrights, trademarks, trade
names, trade dress, designs, mask works, trade secrets, know-how, ideas,
proprietary information, confidential information, inventions, technical
data, and any other information or materials commonly recognized as
intellectual property in the semiconductor industry (collectively,
"Intellectual Property Rights") owned by either Tower or Customer (or their
respective licensors) shall continue to be owned by such parties, and no
license is granted herein, except to the extent necessary for Tower to
manufacture the GOODS for Customer.
7. EXPORT CONTROL. Customer agrees: a) to fully comply with United States (the
"US") laws and regulations, assuring Tower that, unless prior authorization
is obtained from the competent US government agency, the customer does not
intend and shall not knowingly export or re-export, directly or indirectly,
any wafer, devices, technology or technical information received from Tower
in contravention of any law and regulations published by any US government
or other government agency; b) to determine the jurisdiction and export
classification under the US Export Administration Regulations and the US
International Traffic in Arms Regulations of any wafer or device
manufactured by Tower under Customer's direction and to provide the results
of such determination to Tower; c) to take steps, including screening of
end-use and end-user as appropriate, to ensure that any wafer or device
shipped ex-works from Tower will not be used in an sensitive nuclear,
missile, or chemical/biological warfare end-use; d) that any end-user to
whom Tower is directed to assist in delivery is not on the US Denied Person
List, the US Proliferation Entities List, or, if subject to appropriate
jurisdiction, the US Designated National list; and e) that
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-34-
the Customer shall not export or re-export, without the necessary export
licenses from the appropriate authorities, to Albania, Armenia, Azerbaijan,
Belarus, Bulgaria, Cambodia, China, Cuba, Estonia, Georgia, Xxxxxxxxxx,
Xxxxxxxxxx, Xxxxx, Xxxx, Xxxxxx, Lithuania, Moldavia, Mongolia, North Korea,
Romania, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan, Vietnam or
Yugoslavia.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-35-
APPENDIX IV
TRANSFER OF CUSTOMER TECHNICAL INFORMATION
To Be Added.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-36-
APPENDIX V
WAFER PROBE CRITERIA
To be added
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-37-
APPENDIX VI
SCHEDULING EXAMPLE
The examples below illustrate certain of the provisions defined in Section 5.7
of the Agreement. In case of conflict between the Appendix VI and Section 5.7,
the provisions of Section 5.7 shall govern. In the examples below an assumption
is made that the Base Capacity is already * Wafers per month.
Example 1: CUSTOMER has ordered for month * of the forecast * wafers and when
it becomes month * CUSTOMER wishes to increase the number of wafers
purchased to *. TOWER may approve such a request, but is not obliged
to as it is beyond the capacity commitment.
Example 2: CUSTOMER has ordered for month * of the forecast * wafers and when
it becomes current CUSTOMER wishes to increase the number of wafers
purchased to *. TOWER will approve such a request, assuming it does
not contradict the provisions for sale of unused capacity and upside
limitations.
Example 3: CUSTOMER has initially forecasted for month * of the forecast use of
* wafers. After * months, when that month becomes month * of the
current forecast, CUSTOMER wishes to reduce the purchase to *
wafers. TOWER will approve the request as it is within the minus *
limit and within the allowed time frame. When the month becomes
month * of the forecast the CUSTOMER wishes to reduce the purchase
of wafers to *. TOWER may refuse such a request and allow the
reduction only to * wafers, which is minus * of the highest forecast
made for that month.
Example 4: CUSTOMER has initially forecasted for month * of the forecast use of
* wafers. After * months, when that month becomes month * of the
current forecast, CUSTOMER wishes to increase the purchase to *
wafers. TOWER will approve the request as it is within the plus *
limit and within the allowed time frame, however it may be
restricted subject to the provisions of the unused capacity and
upside limitations. When the month becomes month * of the forecast
the CUSTOMER wishes to increase the purchase of wafers to *. TOWER
may refuse such a request and allow the increase only up to *
wafers, which is plus * of the original forecast made for that
month, however it may be restricted subject to the provisions of the
unused capacity and upside limitations.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-38-
Schedule 6.4
PRE-PAID WAFER ACCOUNT
Immediately upon Closing of the Share Purchase Agreement, TOWER shall establish
a Pre-Paid Wafer Account, consisting of a credit balance in CUSTOMER'S favor,
equal to the amount of interest accumulated on the escrow funds and remitted to
TOWER on the Closing Date, to be used to credit the order value of any order
placed by CUSTOMER as provided in Section 6.4 of this Agreement.
Thereafter, upon each exercise by CUSTOMER of the Series A-1 through A-5
Additional Purchase Obligations (the Mandatory Additional Purchase Obligations),
as such Additional Purchase Obligations are described in Exhibit B to the Share
Purchase Agreement, if the Average Traded Price ("ATP") of the Ordinary Shares
is less than Strike Price on the day such Additional Purchase Obligations are
exercised, then TOWER shall increase CUSTOMER'S Pre-Paid Wafer Account by an
amount equal to difference between the ATP and Strike Price multiplied times the
number of Ordinary Shares purchased by CUSTOMER as a result of such exercise.
Average Traded Price or ATP shall mean as of date of any exercise of Additional
Purchase Obligations with respect to the Ordinary Shares, the average of the
Quoted Prices (as defined below) of the Ordinary Shares for the thirty (30)
consecutive trading days immediately preceding such date; provided, however,
that if ATP for any specific exercise is less than US $ *, the ATP shall be
adjusted for that exercise to a floor of US $ * "Quoted Price" of the Ordinary
Shares for any date shall be the last reported sales price (or, in case no such
sale takes place on such date, the average of the reported closing bid and ask
prices) of the Ordinary Shares as reported by NASDAQ or the principal national
securities exchange upon which the Ordinary Shares are listed or traded. If the
Ordinary Shares are not so quoted, listed or traded, the ATP shall be an amount
mutually agreed upon by CUSTOMER AND TOWER.
If an event described in clauses (a) through (d) of Section 4.1.1 of Exhibit B
to the Share Purchase Agreement occurs with respect to the Ordinary Shares prior
to the date of any exercise of Additional Purchase Obligations, the computation
of the Strike Price and the ATP, if such event occurs during the thirty day
calculation of the ATP, shall be appropriately adjusted, to take such event in
to account.
The Strike Price with respect to the Additional Purchase Obligations is US $ *.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-39-