1
Exhibit 4.2
Dated 28th September 2000
DIALOG SEMICONDUCTOR GMBH HEREINAFTER DESCRIBED AS "DIALOG"
and
ESM LIMITED HEREWITH DESCRIBED AS "ESM"
SUPPLY AGREEMENT
2
CONTENTS
1 DEFINITIONS AND INTERPRETATION
2 TECHNICAL SUPPORT AND ASSOCIATED SERVICES
3 PRICING OF PRODUCTION WAFERS
4 ORDERING AND FORECASTING
5 GUARANTEE OF SUPPLY/ALLOCATION
6 WARRANTY
7 CONFIDENTIALITY
8 NON-PUBLICITY
9 PAYMENT TERMS
10 ENGINEERING LOTS REQUIREMENTS
11 QUALITY ASSURANCE/AUDITING
12 CHANGE NOTICES & ECN PROCEDURES
13 CONFORMITY WITH ORDER AND DELIVERY
14 DELAYS
15 CANCELLATIONS
16 CONTINUITY OF SUPPLY
17 OWNERSHIP OF TOOLING AND IPR
18 FORCE MAJEURE
19 PERIOD OF AGREEMENT
20 TERMINATION OF AGREEMENT
21 DUTIES ON TERMINATION
22 AMENDMENTS
23 ASSIGNMENT
24 APPLICABLE LAW
25 DISPUTES
26 NOTICES
27 THE ENTIRE AGREEMENT
2
3
APPENDICES
1 Part I - WAFERS
Part II - PRODUCTION WAFER PRICING
Part III - HOT LOT PRICING
2 SPECIFICATIONS
3 WIP PRICE CALCULATION
4 LOANED EQUIPMENT AGREEMENT
5 CONSIGNED EQUIPMENT
5.(i) CONSIGNED TEST EQUIPMENT
5.(ii) CONSIGNED PRODUCTION EQUIPMENT
3
4
1 DEFINITIONS AND INTERPRETATION
a) In this Agreement the following words and expressions shall have the
meanings set out below unless the context otherwise requires:
"Agreement" this agreement and the appendices hereto;
"Designs" all masks and designs, belonging to Dialog and relating
to the manufacture of Wafers and provided by Dialog to
ESM to enable ESM to set up the Process and to
manufacture the Wafers;
"Die" individual integrated circuits on each Wafer;
"Forecast Period" shall mean each calendar month during the term of this
Agreement;
"Lot" save where otherwise specified herein, a batch of
Wafers produced from * (it being recognised that
* may not result in * * due to losses
incurred in the Process);
"Fab" means any single wafer manufacturing clean room
operated by ESM from time to time at Newport;
* *
"Orders" orders for the supply of Wafers placed by Dialog from
time to time in accordance with the provisions of
clause 4 and which are accepted by ESM;
"Prices" the prices specified in Appendix I parts II, III as
adjusted from time to time during the term of this
Agreement in accordance with clause 3;
"Process" the process for the manufacture of Wafers and including
(but not limited to) the design configuration and
operation of any equipment used in connection
therewith;
"Qualification" the testing of the Process and Qualification Lots to
the relevant Specification and upon passing such tests
("successful Qualification") the relevant Process and
Wafers shall be referred to as "Qualified";
"Qualification
Date" means in relation to any Process (or any Die of a
particular Design manufactured on that Process) the
date on which Dialog confirms in writing to ESM (in
accordance with the provisions of clause 2) that
Qualification has been successfully completed and that
the Process and/or Design is Qualified;
4
5
"Qualification
Lot" such Lot or Lots as shall be manufactured by ESM solely
for the purposes of Qualification and whose prices and
quantities shall be set out in Appendix 1 or, as the
case may be, the Statement of Work as referred to in
clause 2;
"NRE Charge" the sums payable by Dialog in respect of non-recurring
expenses to ESM in respect of the setting up and/or
development of any Process or additional Design and as
agreed between the parties in advance of ESM commencing
set up of the relevant Process or additional Design and
as set out in the Statement of Work as referred to in
clause 2;
"Specification" in relation to those Wafers set out in Appendix 1 part
I, the specifications set out or referred to in
Appendix 2. In relation to any other Wafers which the
parties agree to add to Appendix 1 from time to time,
the specification agreed by the parties in writing at
that time, in each case as amended from time to time by
the parties in writing in accordance with the
provisions of clause 13;
"Start" means a single raw silicon wafer introduced to the
Commencement of the Process;
"Target Yield" means the target yield determined between the parties
on a design by design basis per test program version;
* *
"um" means micron;
"Wafer" integrated circuits in the form of silicon wafers
manufactured by ESM pursuant to this Agreement and as
referred to in Appendix 1 together with such other
silicon wafers as the parties may agree and add to
Appendix 1 from time to time;
b) words in the singular shall include the plural and vice versa; references
to a gender shall include all genders; references to persons shall include
natural persons, partnerships, companies and unincorporated associations;
and references to a "party" or the "parties" shall mean a party or the
parties to this Agreement;
c) headings are for convenience only and shall not affect the construction or
interpretation of this Agreement; and references to clauses are to clauses
of this Agreement.
5
6
2 TECHNICAL SUPPORT AND ASSOCIATED SERVICES
a) In relation to those Wafers and Die referred to in Appendix I part I at the
date of this Agreement, the parties agree and acknowledge that Processes for
manufacture of such Wafers are Qualified in accordance with written criteria
agreed between Newport Wafer-Fab Limited and Dialog (which criteria are
also agreed between the parties hereto):
b) In relation to any additional Wafers or Processes which the parties agree to
include in Appendix I from time to time:
i) Dialog shall, within an agreed timescale, provide to ESM the Designs
free of charge in such form and detail as ESM shall reasonably require.
Further, the parties shall agree the contents of a statement of work
("Statement of Work") detailing the process for development, set up and
Qualification of the relevant Process together with details of the NRE
Charge payable to ESM in relation to the same;
ii) the parties shall co-operate and perform their respective
responsibilities in the Statement of Work in relation to the relevant
Process;
iii) Dialog shall pay to ESM the NRE Charges in accordance with the
timescales set out in the Statement of Work and subject to occurrence
of the relevant milestone stages specified therein;
iv) in the event that Dialog requires, prior to the relevant Process being
Qualified, any works to be carried out in relation to the Wafers or
Process in addition to the Statement of Work or shall require any
Qualification Lots in excess of those set out in the Statement of
Work, ESM shall be entitled to charge Dialog additional fees and
expenses, such fees and expenses to be agreed prior to commencement
of any work;
v) Dialog shall promptly carry out Qualification testing within a
reasonable period of time of receipt of the relevant Qualification
Lot(s) and keep ESM promptly and fully informed as to the results of
such Qualification. In the event that such testing demonstrates that
the Qualification Lots comply with the Specification, Dialog shall
promptly notify ESM of successful Qualification. Dialog shall not
unreasonably withhold Qualified status. Dialog shall keep true and
detailed records of any Qualification tests and shall permit ESM, its
agents and representatives at all reasonable times to inspect and
(subject to consent of Dialog not to be unreasonably withheld) take
copies of or extracts from any such records in the possession, custody
or control of Dialog. ESM shall (save for reimbursement of any NRE
charges which have been paid to ESM in respect of the Qualification in
question where failure to Qualify was due to ESM's failure to fulfil
its obligations under the Statement of Work) not be liable to Dialog
for failure to achieve Qualified Status and in the event that any
Process or Wafer has not Qualified within 3 months of the date
envisaged in the relevant Statement of Work, either party may elect to
discontinue further work in relation to achieving Qualified Status of
the relevant Process or Wafer.
6
7
vi) Each party shall provide the other with technical support and
assistance as the other may reasonably require to identify and correct
any Qualification failure which becomes apparent during the
Qualification tests. Further Dialog shall upon reasonable notice and
at such times as the parties shall reasonably agree, be entitled to
have an employee on site at ESM's premises in Newport during normal
working hours who shall be entitled to observe the Processes in
operation in the performance of this Agreement and to liaise with
stiff of ESM in order to ensure maintained quality standards. Dialog
shall replace such employee at ESM's request where ESM reasonably
determines that there has been a breakdown in working relationship.
vii) unless otherwise agreed in writing, no: Wafers shall be produced or
supplied to Dialog prior to Qualification Date of the relevant Process
and Design for use other than in connection with Qualification
testing.
3 PRICING OF PRODUCTION WAFERS
a) In relation to Wafers of the type specified in Appendix I part I, the
pricing is according to Appendix I parts II to III. In relation to Wafers
added to Appendix I by agreement between the parties, the prices shall be
as agreed between the parties at that time and Wafers shall not be added to
Appendix I until the relevant price is agreed. The prices quoted from time
to time in Appendix I are in U.S. currency and net of any and all taxes and
duties, including but not limited to, custom duties, sales tax, value added
tax, use tax, and excise tax. Dialog shall pay all applicable taxes (which
may include one or more of the above taxes) in addition to the prices
quoted in Appendix I. During * and * of each subsequent year, the
parties shall re-negotiate in good faith the prices for the Wafers for the
succeeding year commencing * and if no agreement can be reached with
respect to the Wafer prices by * the prices applicable to the succeeding
year shall be the existing price then in effect.
b) *
c) In relation to the * and * designs, the parties are presently
collaborating regarding introduction of improvements to the * and *
designs respectively, which are of a smaller Die size and therefore
increase the number of gross Die per Wafer. It is intended that the parties
will share the benefit of any gross die count achieved directly through
such improvements.
7
8
The following wafers price increases relative to Wafer prices would apply.
Current process design rules (as defined in appendix 2) No Change
*
d) *
e) *
8
9
4 ORDERING AND FORECASTING
a) At least five days prior to the 1st day of each Forecast Period Dialog will
provide a rolling forecast ("the Forecast") of its delivery requirements for
Wafers for the 12 months commencing on the first day of the said Forecast
Period. Dialog will use all reasonable endeavours to ensure that its Wafer
requirements are spread evenly throughout the year, though this cannot be
guaranteed. The forecasting principle will be as follows:
*
b) At the same time as issuing its first Forecast, Dialog shall place orders
with ESM for the Wafers detailed in months 1 to 4 of such Forecast. Upon
issuing each subsequent Forecast, Dialog shall place orders with ESM for
the Wafers detailed in month 4 of such Forecast.
c) Orders placed by Dialog as referred to above shall be accepted by ESM
within 3 working days of receipt (and shall then be binding) in so far as:
i) they are within the scope of the most recent forecast for the fourth
calendar month of such forecast; and
ii) the total Guaranteed Capacity for Wafers to be delivered in any
particular Forecast Period has not been exceeded.
d) Any orders placed by Dialog above the amounts specified in c)(i) and (ii)
shall be subject to acceptance by ESM, which it may in its direction
withhold. ESM shall communicate its acceptance or rejection of such orders
within 5 working days of receipt. Orders accepted by ESM in accordance with
this clause 4(d) shall be binding on the parties.
5 GUARANTEE OF SUPPLY/ALLOCATION
a) Subject to the remainder of clause 5 ESM agrees to provide Dialog with a
guaranteed capacity ("GUARANTEED CAPACITY") as follows:
*
9
10
*
The above capacity reservations are also conditional upon Dialog having
complied with its obligations under Appendices 4 and 5 and upon ESM having
successfully configured and installed the equipment as referred to in
Appendices 4 and 5 within the timescale necessary to meet the
aforementioned Guaranteed Capacity and such equipment operating (in
conjunction with other ESM plant) in accordance with its specifications. In
the event that the foregoing is not achieved due to unavailability of
equipment or installation and consultancy services in relation to such
consigned equipment, or failure or delay of the same to operate to
specification within such timescales as aforesaid the parties shall meet
and discuss in good faith how to remedy the situation and to agree what
Guaranteed Capacity levels shall apply.
Further, ESM shall from the time Fab3 is fully equipped and operational and
subject to agreement on price and specification for the relevant wafers provide
a Guaranteed Capacity of * production capacity of Fab3 from time to time.
b) ESM agrees to use its reasonable endeavours to accelerate its increase in
production capacity and efficiency in an effort to make available capacity
of * per month prior to Apr 2001.
c) Without prejudice to clause 5(d) and 5(e), ESM shall in any Forecast Period
be entitled to utilise the short fall between the Guaranteed Capacity for
that period and the volume of Wafers ordered by Dialog during that period
as ESM shall see fit including for the purpose of supplying Wafers to its
other customers.
d) In relation to each of Fab 1 and Fab 3 in the event that in relation to any
three consecutive Forecast Periods Dialog forecasts (in its latest forecast
prior to commencement of the first of such Forecast Periods) that its
aggregate required amounts for those periods for Wafers produced in the
relevant Fab are less than the aggregate Guaranteed Capacity (as may have
been previously adjusted in accordance with this clause 5) for the relevant
Fab and periods then the Guaranteed Capacity for the relevant Fab per
Forecast Period shall for the remainder of this Agreement (but subject to
any further amendments pursuant to this clause 5(b) and/or 5(e)) be amended
to equal the average amount of volumes and wafer type set out in Dialogs
latest forecast for Wafers produced in the relevant Fab for each of those
periods plus * of such average where such total amount is less than the
Guaranteed Capacity for the relevant Fab (as may have been previously
adjusted in accordance with this clause 5).
10
11
e) In relation to each of Fab 1 and Fab 3 in the event that in relation to any
three consecutive Forecast Periods Dialog does not place Orders for the
relevant Fab (which are binding under clauses 4(c) and/or 4(d) in
aggregate equal to or in excess of * of the aggregate Guaranteed Capacity
for the relevant Fab (as may have previously been adjusted in accordance
with this clause 5) of those periods then without prejudice to any rights
or remedies ESM may have, the Guaranteed Capacity for the relevant Fab per
Forecast Period shall for the remainder of this Agreement (but subject to
the remainder of this clause and to any further amendment pursuant to
clause 5(d) and/or this clause 5(e)), unless the parties agree otherwise,
reduce to equal the average plus * of the volumes and Wafer type for Wafers
produced in the relevant Fab which were the subject of binding Orders
placed by Dialog for delivery during the said three Forecast Periods where
such total amount is less than the Guaranteed Capacity for the relevant Fab
(as may have been previously adjusted in accordance with this clause 5).
*
f) In the event that Guaranteed Capacity is reduced under clauses 5(d) or 5(e)
ESM agrees that, on Dialog's request, it will discuss such reduction with
Dialog and may, following such discussion agree to reinstate (in whole or
part) the relevant Guaranteed Capacity
6 WARRANTY
a) ESM warrants all Wafers will comply with the relevant Specification for *
from date of delivery (or such other longer period as may be agreed).
Dialog will use all reasonable endeavours to report any failure to comply
with Specification as soon as practicable and in any event within * of
receipt of the relevant Wafers. Further where Dialog probe they will report
the yield results to ESM within * of probing. If any Wafers do not during
the said * period conform to the Specification or are not at the time of
delivery, of new (ie manufactured within the previous 3 months) manufacture
(hereinafter called a "Defect") then Dialog shall (without prejudice to any
other right it may have under this Agreement) be entitled to exercise one
of the following rights:-
i) Require ESM to use its best efforts as necessary to replace the Wafers
free of additional cost to Dialog and at ESM's risk; or
ii) where the parties agree (agreement not to be unreasonably withheld)
that Dialog cannot utilise or sell the Wafer in question or ESM no
longer manufactures the Wafer in question, reject the Wafers in
question in whole or in part and require ESM to credit Dialog with
sums paid in respect of the same.
b) The warranty in 6(a) is given by ESM subject to the following conditions:
11
12
i) ESM shall be under no liability in respect of any defect in the Wafers
arising from any drawing, design or specification (which shall include
without limitation the Designs and the Specifications) provided by
Dialog or as a result of Dialog's designs failing to comply with the
design rules issued by ESM from time to time outlining relevant design
parameters for its plant. Dialog undertaken to promptly notify ESM of
any such failure to comply with the said design rules, in force at the
time of each database release to mask manufacture.
ii) ESM shall be under no liability in respect of any defect arising from
fair wear and tear, wilful damage. Dialog's negligence, abnormal
working conditions, improper or faulty handling and use, modification,
misuse or alteration or repair of the Wafers by Dialog or its Agents or
contractors.
c) Except as expressly set out in this clause 6 ESM does not give any warranty
to Dialog or its customers with respect to the Wafers. All other warranties,
terms or conditions, whether express or implied by statute or common law or
trade usage or otherwise, including but not limited to any warranties terms
or conditions as to the merchantability or satisfactory quality of, or the
fitness for a particular purpose of, any of the Wafers are hereby excluded.
d) ESM's liability under or in connection with this Agreement, whether in
contract or in tort or otherwise howsoever in respect of:
i) death or personal injury caused by its own negligence or that of its
employees, agents or sub-contractors shall not be limited;
ii) damage to property caused by negligence of ESM or that of its
employees, agents or subcontractors, shall not exceed, in any calendar
year, an aggregate of pound sterling 2 million;
iii) any other loss or damage shall not in relation to any Order, exceed
the price paid by Dialog in respect of such Order.
7 CONFIDENTIALITY
a) Save for information described in clause 7(c)(i) to (iii) Dialog and ESM
shall keep strictly confidential and not without the other party's prior
consent in writing disclose to any third party, any document or information
whether of commercial or technical nature furnished by the other party
pursuant to this Agreement. The receiving party shall use the same only for
the purpose of this Agreement.
b) "information" shall mean all documents, ideas, know-how and other
information supplied by one party to the other (whether disclosed orally, in
documentary or other material form, by demonstration or otherwise), which:
i) in the case of any document is marked as being "Confidential", or
"Proprietary", or by any other appropriate legend; and
ii) in the case of information orally disclosed, is identified by the
disclosing party at the time of disclosure as being disclosed in
confidence and is confirmed in writing by the disclosing party after
oral disclosure; and
iii) relates to one party's business or processes and is obtained by
employees of the other whilst present, on the first party's site.
12
13
"the disclosing party" shall mean the party furnishing information, and
"the recipient" shall mean the party receiving it, in the particular case.
c) All information furnished by the disclosing party shall be treated by the
recipient as confidential, shall not be disclosed to others, except
employees of the receiving party having a need-to-know, or used other than
for purposes for which it was submitted without the disclosing party's
prior written consent, except for any of the information which the
recipient can show;
i) is already known to the recipient at the date it was disclosed to it
by the disclosing party and is or becomes free of restriction on the
disclosure or use in question; or
ii) is or becomes generally known or freely available to the public
(except by reason of any breach by the recipient of its obligations
hereunder); or
iii) is disclosed to the recipient, free of restriction on the disclosure
or use in question, by a third party who was entitled to make such
unrestricted disclosure; or
iv) is independently developed by the recipient.
d) The recipient will take such precautions and make such arrangements as are
reasonably necessary to protect the information received by it (and in any
event no less than those the recipient would take and make to protect its
own confidential information).
e) Upon expiration or termination of this Agreement, each party shall return
to the other, if requested in writing, all written or descriptive matter,
including, but not limited to drawings, blueprints, descriptions, or other
papers or documents which contain any such valuable proprietary information
of the other Party and shall retain no copies of same. The obligations of
confidentiality shall survive termination of this agreement.
f) No licence to either party under patents, trademarks or copyrights is
granted or implied by the disclosure of confidential information under this
Agreement. However, ESM is hereby licensed to use the Designs for the
purpose of manufacture and supply of Wafers to Dialog under the terms
hereof.
8 NON-PUBLICITY
a) Neither party shall publish or otherwise disclose the terms of this
Agreement (save in so far as may be required by law or may be necessary for
the due performance of the Agreement) without the prior approval in writing
of the other party. The foregoing shall not apply to the extent that such
disclosure is required by the City Code on Takeovers and Mergers, London
Stock Exchange Limited or any other stock exchange regulatory authority to
which either party is or may become bound to comply, subject to the
parties having previously consulted where practicable as to the timing,
content and manner of such disclosure.
13
14
9 PAYMENT TERMS
a) Payments shall be made by Dialog to ESM within * days of the date of the
invoice. A copy of the invoice will be faxed to Dialog on date of issue.
b) At ESM's option, to be exercised by not less than * days notice, payment
shall, during such period as ESM shall elect, be made within * days of
date of invoice or delivery of the relevant Wafers whichever is the later
subject to Dialog receiving a * discount on the relevant invoices.
10 ENGINEERING LOTS REQUIREMENT
a) ESM will provide Dialog with engineering runs as required subject to a
limit, at any one time,
*
Any further requests for engineering or multi-project Wafer runs will be
subject to agreement of the parties, such agreement not to be unreasonably
withheld having taken into account the production commitments of ESM to
Dialog and its other customers.
For the purposes of this clause 10:
i) an engineering run shall be deemed to be any single Lot which has any
Wafers held in or removed from the Process line part processed or has
splits in processing within a single Lot. The price payable in respect
of each engineering lot shall be as specified in Appendix I and shall
be subject to the annual price negotiation referred to in clause 2.
For the avoidance of doubt, engineering lots shall not be charged per
wafer but per Lot.
ii) *
iii) *
11 QUALITY ASSURANCE/AUDITING
a) ESM shall ensure that their quality assurance/inspection authority is
supported by adequate staff proficient in this role.
b) Dialog requires ESM to actively work to maintain of ISO 9002 and QS9000,
ESM agrees to support this.
c) Dialog shall have the right to make quality inspections/audits at the ESM
manufacturing location(s) at agreed intervals in time. This right shall be
extended to Dialog's customers by agreement with ESM, and subject to ESM
receiving required confidentiality undertakings from such customers.
14
15
d) ESM will provide, upon Dialog's written request during the term of this
Agreement, ESM's available reliability and quality data regarding Wafers
produced for Dialog for the purpose of maintaining consistent quality and
reliability standards for such Wafers.
e) During the term of this Agreement, ESM shall maintain fab and test lot
traceability for Wafers manufactured on behalf of Dialog. The parties shall
meet annually and agree (agreement not to be unreasonably withheld) which
traceability records retained by ESM may be destroyed.
f) ESM will promptly after discovery advise Dialog of defects and/or
non-conformity in Wafers already delivered to and/or in lots currently in
manufacture for Dialog. During the term of this Agreement, ESM will provide
Dialog with written quarterly quality assurance reports regarding Wafers (if
any) manufactured on behalf of Dialog in those months.
g) Wafer acceptance with be subject to process control monitor acceptance
criteria to be mutually agreed upon on a process-by-process basis. Minimum
yield and low yield lot criteria will be negotiated on a product-by-product
basis. All accept-reject criteria shall be the agreed upon Wafer Acceptance
and Visual Inspection Specifications and all critical dimension and process
tolerances shall be solely as agreed upon in writing.
h) Subject to Dialog's obligations with respect to volumes committed under the
ordering and forecasting procedures involved, upon receipt of Dialog's
written Stop Request, ESM will immediately stop shipment of Wafers which are
subject to a suspected failure to meet the criteria specified in the
Specification. If ESM is responsible for a proven failure so as to breach
the warranties in clause 6, and ESM is not able to correct the matter within
forty-five (45) days of receipt of such Stop Request, then subject to the
provisions of clause 6(b) to (d) Dialog may exercise its rights under
clause 6(a).
i) If Dialog requests, under (h) above ESM to stop delivery of any Wafers which
Dialog is obligated to purchase, and the Wafers are determined in good faith
by ESM to have been processed in accordance with the applicable
Specification, in addition to and without either party waiving any other
remedies, Dialog shall pay for completed goods at the purchase order price
and payment for work in progress shall be the Wafer Price as amended in
accordance with Appendix 3 to make an appropriate but not pro rata
calculation based on the relative mask step at which the Wafer(s) were at
the time of cancellation.
j) Upon written request from Dialog and subject to satisfactory arrangements
for payment to ESM for the reasonable costs involved, ESM will perform
failure analysis of Wafers returned to ESM pursuant to ESM's standard return
material authorisation procedures. If such analysis shows the existence of
material defects in breach of applicable ESM warranties, ESM will not be
entitled to payment for the cost of the failure analysis concerning such
defects for the specific Wafers which were subject to them.
12 CHANGE NOTICES & ECN PROCEDURES
a) After a Process is Qualified, all changes, which result in changes to
electrical or mechanical specifications of the relevant Wafers, in the
relevant manufacturing Process and materials used by ESM to fabricate goods
provided to Dialog must first be approved by both parties under ESM's ECN
procedures. Without limiting the foregoing, during the term of this
Agreement
15
16
i) ESM shall give Dialog advance written notice of any proposed change(s)
("Proposed Change Notice") in materials and/or to its existing
manufacturing process, which, to the best of ESM's knowledge, affect
the form, fit, performance, maintainability, operation, function,
reliability, interface, interconnectability, compatibility, design
rules, models, or size of the chips for Wafers then Qualified and
subject to open purchase Orders from Dialog or which would require
verification on silicon.
ii) Such Proposed Change Notice shall describe the nature of the proposed
changes(s), including reasons for the change(s), the anticipated
schedule for implementation of the change(s), and other relevant
technical and logistic considerations, including without limitation
quality and reliability data to the extent available.
iii) Dialog shall approve or disapprove any such proposed change promptly,
but in no event may any such change be disapproved later than five (5)
business days after receipt of the Proposed Change Notice.
iv) If Dialog disapproves such proposed change within the five business day
period allowed, ESM shall continue to manufacture and deliver to Dialog
unchanged Wafers in accordance with this Agreement for a minimum of six
(6) months from the date ESM issues the Proposed Change Notice.
v) Upon the expiration of three months after the following Proposed Change
Notice, ESM, in its discretion and by then giving a minimum of three
months prior written notice to the Dialog, may stop manufacture and
delivery of all Wafers involved without liability and thereafter such
Wafers shall be deemed removed from Appendix I.
vi) ESM shall not, without agreement of Dialog, use in engineering
experiments or withdraw from the production line for use in engineering
experiments Wafers which are in the process of production pursuant to
binding purchase Orders placed by Dialog.
b) After successful Qualification Dialog reserves the right to prepare changes
to the design of Wafers to be produced for it by ESM, provided however that
each such change must be timely documented by Dialog through written change
notices and agreed by ESM. Notwithstanding anything to the contrary, after
Process Qualification runs for a particular design have been made and
approved by ESM and Dialog, any Dialog-requested changes to design, process
or materials for such Wafers shall be subject to ESM's consent (which will
not be unreasonably withheld) and payment by Dialog of applicable reasonable
costs and price increases, if any, related to such change.
c) No additional quality assurance requirements or measurements (whether cv
plots, metal step coverage analysis, SEM analysis, or other) will be
required except upon ESM's written agreement as to the step or measurement
to be performed, and Dialog's commitment to pay ESM's stated costs.
13 CONFORMITY WITH ORDER AND DELIVERY
a) Delivery of orders binding on the parties, under clause 3 will be made
ex-works Newport UK (or as otherwise agreed in writing) in accordance with
Incoterms 2000.
16
17
b) Risk in the Wafers shall pass on delivery notwithstanding that title to the
Wafers shall not pass to Dialog until ESM has received payment in full for
the Wafers.
c) If at any time Dialog fails to make payment in full of any amount payable to
ESM for the Wafers supplied or Dialog becomes insolvent or a receiver is
appointed or Dialog is liquidated (except for the purposes of a solvent bona
fide amalgamation, reconstruction or other reorganisation), then (provided
the relevant Wafers are still in existence and have not been resold) ESM may
forthwith enter upon the premises of Dialog for the purpose of repossessing
the Wafers supplied in which title has not passed to Dialog up to the value
of the Wafers in respect of which payment has not been made and Dialog
hereby grants to ESM a license for that purpose.
d) All products must be properly and securely packed and the package marked
with Dialog's part number and order number. Dialog will return containers to
ESM if previously requested, at ESM's expense.
14 DELAYS
a) Without prejudice to any other rights Dialog may have under this Agreement
Dialog has the right to cancel an Order wholly or in part without liability,
where the relevant Wafers are not available for collection in accordance
with the relevant forecast or other agreed date or on a new date
subsequently agreed with Dialog. Dialog will not unreasonably withhold such
agreement.
b) Time shall not be of the essence in relation to this Agreement or any Order.
15 CANCELLATIONS
a) Upon termination of this Agreement or upon Dialog ceasing to require
production of a particular Wafer, Dialog undertakes to pay a fair and
reasonable price for raw materials purchased by ESM in reliance upon the
forecast up to that time and which cannot reasonably be deployed to fulfil
the then current requirements of its other customers, up to a maximum of
12 weeks requirement of such stock or material in production against orders
with the raw material supplier, calculated on the average consumption of
such stock by ESM over the previous 6 months.
16 CONTINUITY OF SUPPLY
a) ESM undertakes to inform Dialog in writing as soon as possible of any plans
to suspend or close down manufacturing of Wafers or specific Processes, with
a view to permitting Dialog to place consolidated orders for future
requirements.
b) ESM shall be entitled to close down manufacture of Wafer or Specific
Processes (whereupon the same shall be removed from Appendix 1) provided
always that Dialog shall be entitled to place Orders for the relevant Wafers
in accordance with and subject to the terms of this Agreement within 6
months of such notice, for delivery within 12 months of the order date.
17 OWNERSHIP OF TOOLING AND IPR
a) All Designs provided by Dialog and used to manufacture Wafers for Dialog
shall remain the property of Dialog. Upon receipt of a written request from
Dialog, ESM shall deliver to Dialog all such designs in its possession or
control.
17
18
b) The parties agree that ESM (or its licensor) owns or, as the case may be,
shall own all rights in and relating to the Processes used from time to
time. Each party shall retain ownership of their respective intellectual
property rights (including knowhow) and, without prejudice to the foregoing,
Dialog does not assign any of its rights to ESM.
c) ESM is authorised to use Designs produced by Dialog for the purpose of
supply Wafers under the terms of this Agreement.
18 FORCE MAJEURE
a) Nether party shall be liable in any circumstances for any failure to perform
any of its obligations hereunder if such failure is due to any cause beyond
its reasonable control including, without limitation, war, act of God,
governmental act, fire or explosion. Non-availability of materials shall be
consider Force Majeure.
19 PERIOD OF AGREEMENT
a) This Agreement becomes effective from the date of signing by both parties
and, unless terminated earlier in accordance with its terms shall remain in
force until * * and shall continue in force thereafter until either party
terminates by giving to the other not less than * written notice, such
notice to expire on or after * .
20 TERMINATION OF AGREEMENT
a) Either party (the "first party") may, without prejudice to any other rights
or remedies it may then have, forthwith terminate this Agreement by written
notice to the other in the event that the other is in material breach of any
of the provisions hereof provided that the first party shall not be entitled
to terminate if (i) the other party remedies such breach within 60 days (or
such longer period as the parties may agree) of written notice from the fist
party specifying the breach and (ii) within 30 days of receipt of written
notice from the first party the other party takes reasonable steps to
commence remedy of the relevant breach.
b) Either party may terminate this Agreement forthwith by written notice in the
event that the other party, is wound up or goes into liquidation (except for
the purposes of a solvent bona fide amalgamation, reconstruction or other
reorganisation and in such manner that the company resulting from such
reorganisation effectively agrees to be bound by or to assume the
obligations imposed on that other party under this Agreement).
21 DUTIES ON TERMINATION
a) Upon termination of this Agreement (other than termination by Dialog
pursuant to clause 20(a)), Dialog shall be obligated to accept and pay for
all the Wafers which are subject to binding Orders as at the date of
termination. If this Agreement is terminated by Dialog under clause 20(a),
then Dialog will be entitled either to cancel all Orders for the Wafers not
notified to Dialog as available for collection at the time of termination,
or to require ESM to fulfil all binding Orders for the Wafers which are
outstanding at the date of termination subject to payment by Dialog of the
relevant price. Further, if ESM terminates this Agreement in accordance with
clause 19, ESM shall be obliged to fulfil all binding Orders for the Wafers
which are outstanding at the date of termination, subject to payment by
Dialog of the relevant price and in relation to such supply the provisions
of this Agreement shall, notwithstanding termination, continue in full force
and effect.
18
19
b) Following the termination of this Agreement due to notice properly served
by Dialog under clause 20(a) ESM shall promptly co-operate with Dialog and
provide assistance in the transfer by Dialog to an alternative supplier and
shall if requested by Dialog continue to supply Wafers in accordance with
the terms hereof (including lead times) for a period not to exceed 3 months
and in relation to such supply the provisions of this Agreement shall,
notwithstanding termination, continue, full force and effect.
c) For the avoidance of doubt ESM does not grant and shall not be obliged to
grant to Dialog or any alternative supplier a right to use any intellectual
property rights or know how owned or used by ESM in the production of
Wafers (and ESM shall not be obliged to disclose the same) whether for the
purpose of Wafer manufacture or otherwise.
d) The expiration or earlier termination of this Agreement will not operate to
release either hereto from its obligation under or the effect of clauses 6,
7, 17, 21 to 27, which obligations and provisions will survive such
expiration or termination, or from any liability which has already accrued
to the other party as of the date of expiration or termination or which
may thereafter accrue in respect of any act, omission or default occurring
prior to expiration or termination.
22 AMENDMENTS
a) Any amendment to this Agreement has to be made in writing and signed by
both parties.
23 ASSIGNMENT
a) Neither of the parties can assign this Agreement in whole or in part to any
third party without the prior written consent of the other party.
24 APPLICABLE LAW
a) This Agreement shall be governed by the laws of England and Wales.
25 DISPUTES
a) Any disputes which arise in respect of matters provided for in this
Agreement shall be initially submitted to the Chief Executive of ESM and
Dialog's Managing Director for resolution. If such attempt at resolution is
not successful within 30 days of such submission the dispute shall subject
to the jurisdiction of the courts of England and Wales, to which
jurisdiction both parties hereby expressly submit.
26 NOTICE
a) All notices, consents, approvals or other communications hereunder shall be
in writing and shall be delivered personally or by registered or certified
mail, postage prepaid, or sent by fax, addressed to the relevant party at
the following address (or other address for a party as shall be specified
by like notice):
If to ESM to:
▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇
19
20
Attention: The Chief Executive
Fax: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
If to Dialog to:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇
▇-▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇/▇▇▇▇-▇▇▇▇▇▇
▇▇▇▇▇▇▇
Attention: The Managing Director
Fax: ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇
27 THE ENTIRE AGREEMENT
a) This Agreement supersedes all other agreements between the parties either
oral or written and represents the entire agreement between the parties.
b) Save as the parties may agree in writing from time to time (whether in a
Statement of Work or otherwise), all Wafers sold by ESM are sold subject to
the terms of this Agreement which shall be the sole terms and conditions of
any sale by ESM to Dialog. Terms and conditions on Dialog's order for a or
other similar document shall not be binding on ESM. Terms and conditions on
ESM's quotations or invoices or other similar document shall not be binding
on Dialog.
c) For the avoidance of doubt the Agreement between the parties dated 2nd
August 1999 relating to supply of Wafers is hereby terminated and each
party irrevocably waives any rights against the other (save under clause 6,
7, 8(a) 19(b) and 23(c) thereof in connection with the same).
ESM LTD. DIALOG SEMICONDUCTOR GMBH
Date: 28th September 2000 Date: 28th September 2000
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇. ▇▇▇▇▇▇▇
Signature: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Signature: ▇. ▇▇▇▇▇▇▇
Position: CEO Position: CEO & President
20
21
APPENDIX 1
PART I - WAFERS
*
PART II - PRODUCTION WAFER PRICING
*
PART III - PRICING
*
21
22
*
22
23
APPENDIX 2 SPECIFICATION
ESM Spec No Rev Description
----------- --- -----------
*
24
*
25
*
26
APPENDIX 3 WIP PRICE CALCULATION
*
27
Appendix 4
Dialog Semiconductor GmbH
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇,
▇▇▇▇▇▇▇
("Dialog")
TO:
ESM Limited,
▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇
Dear Sirs
As you know, ESM and Dialog have entered into an agreement for the supply by ESM
of silicon wafers to Dialog (the "Supply Agreement"). Dialog are willing to loan
ESM the hardware and software as detailed in the attached appendix (the "Loan
Equipment") free of charge for the term of the Supply Agreement (the "Loan
Term") on the terms and conditions set out below:
1 THE LOAN EQUIPMENT
(a) Dialog shall at its expense install the Loan Equipment by way of loan
in ESM's Premises.
(b) Throughout the Loan Term ESM agrees that:-
(i) the Loan Equipment will remain the property of Dialog even if
it is fixed to ESM's Premises;
(ii) it will not seek to assert title in the Loan Equipment;
(iii) Dialog may place and maintain on the Loan Equipment such
plates, marks and numbers as it considers appropriate to
indicate that he Loan Equipment is Dialog's property;
(iv) ESM will permit Dialog or its agents at all reasonable times
to inspect the Loan Equipment and for that purpose to enter
ESM's Premises or any other premises where the Loan
Equipment may be;
(v) ESM will maintain the Loan Equipment in good order and
condition, fair wear and tear only excepted;
(vi) ESM will use the Loan Equipment in accordance with the
relevant operating manual;
(vii) ESM will insure the Loan Equipment with the interest of Dialog
noted on the policy;
(viii) ESM will keep the Loan Equipment at ESM's Premises.
28
(c) ESM may use the Loan Equipment for probing Wafers to be delivered to
any of its customers provided that any such probing of Wafers to be
delivered to third parties does not prevent ESM from probing Wafers for
delivery to Dialog in accordance with the terms of the Supply
Agreement.
2 LOSS OR DAMAGE TO THE LOAN EQUIPMENT
(a) If the Loan Equipment is damaged during the Loan Term and such damage
is covered by an insurance policy and if in the opinion of the insurers
it is economic that such damage be made good all insurance monies
payable under the said insurance shall be applied in making good such
damage.
(b) If the Loan Equipment is lost, stolen, destroyed or damaged and such
loss or damage is covered by insurance and the Loan Equipment is lost
or damaged to such an extent as to be in the opinion of the insurers
incapable of economic repair all insurance monies payable to ESM under
the said insurance shall be paid to Dialog in full and the Loan Period
shall come to an end.
(c) ESM's liability for damage, loss or destruction to the Loan Equipment
is limited except where ESM is guilty of gross negligence or wilful
default to the amount payable under any insurance policy as set out in
clauses 2(a) and (b) above.
3 TERMINATION
(a) If the Supply Agreement is terminated for any reason then Dialog may
immediately terminate the loan of the Loan Equipment and in such event
may enter ESM's premises to recover the same if ESM fails to promptly
return the Loan Equipment.
4 LAW
(a) This Letter shall be governed by and construed in accordance with
English law, and the parties hereto hereby irrevocably submit to the
non-exclusive jurisdiction of the English Courts.
Please confirm your agreement to the terms set out in this letter by signing
and returning the attached copy of this Letter.
Yours faithfully
▇. ▇▇▇▇▇▇▇
-------------
For and on behalf of Dialog
We agree to the above terms
▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------
Signed for and on behalf of ESM
29
APPENDIX 5 CONSIGNMENT AGREEMENT
APPENDIX 5(I) CONSIGNED TEST EQUIPMENT
*
LOAN EQUIPMENT
*
APPENDIX 5(II) CONSIGNED PRODUCTION EQUIPMENT
*
30
[EMS LOGO]
Dialog Semiconductor GmbH
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ unter Teck,
Nabern,
Germany
Cardiff Road
Newport
South Wales NPIO BY
United Kingdom
Tel (44-1633) 810121
Fax (44-1633) 810820
Dear Sirs
Agreement dated 28th September 2000 between Dialog Semiconductor GmbH and ESM
Limited relating to supply of Wafers (the "Agreement")
We refer to the Agreement.
In consideration of the mutual release in 3 below, the Agreement shall be
amended as follows.
1 Appendix 1 of the Agreement shall be replaced by the agreed revised version
of Appendix 1 attached hereto.
2 Appendix 5 of the Agreement shall be replaced by the agreed revised version
of Appendix 5 attached hereto.
3 The aforesaid amendments shall be deemed to be effective from the date of
the Agreement. Each party hereby irrevocably releases the other from its
obligations and liability under the Appendices 1 and 5 of the Agreement
which were in place prior to the date of this letter.
4 Save as aforesaid the Agreement remains unamended.
1
[GRAPHIC] [GRAPHIC]
INVESTOR IN PEOPLE Registered office as above
Registered in England
No: 376927
31
5 This letter of variation shall be governed by and construed in accordance
with English law.
Please sign below to indicate your agreement to the above.
[SIGNATURE]
Signed as deed by ESM Limited ) ___________________________
acting by a director and its secretary or by ) Director
two directors )
[SIGNATURE]
Secretary or Director
[SIGNATURE]
Signed as a deed by DIALOG ) __________________________
SEMICONDUCTOR GmbH acting by ) Director
a director and its secretary or by )
two directors )
[SIGNATURE]
___________________________
Vice President Finance
& Controlling
2
32
APPENDIX 1
Part I -- WAFERS
*
Part II -- PRODUCTION WAFER PRICING
*
Part III -- PRICING
*
1
33
*
2
34
APPENDIX 5 CONSIGNMENT AGREEMENT:
APPENDIX 5(I) CONSIGNED TEST EQUIPMENT
*
APPENDIX 5(II) PREPAYMENT FOR SECURING CAPACITY
*
3