**Exhibit 10.55**[*] Portions denoted with an asterisk have been omitted and filed separately with theSecurities and Exchange Commission pursuant to a request for confidential treatment.**WAFER SUPPLY AND TEST SERVICES AGREEMENT**     **This Wafer Supply and Test Services Agreement** (the “Agreement”) is entered into as ofEffective Date by and between **S****emiconductor Components Industries, LLC**, a Delaware limitedliability company with its principal place of business at 5005 East McDowell Road, Phoenix, Arizona85008 (“SCI”)**,**and **LSI Logic Corporation**, a Delaware corporation with its principal placeof business at 1621 Barber Lane, Milpitas, CA 95035 (“LSI”). In this Agreement, LSI and SCI arereferred to collectively as the “Parties” and each of them is sometimes referred to individually asa “Party.”**Recitals**     A. SCI and LSI are parties to an Asset Purchase Agreement dated April 5, 2006 (the “AssetPurchase Agreement”) pursuant to which LSI has agreed to cause its and its subsidiaries’ right,title, and interest in and to certain assets associated with LSI’s semiconductor wafer fabricationfacilities in Gresham, Oregon to be sold and transferred to SCI and SCI has agreed to acquire thesame from LSI and its subsidiaries.     B. LSI and its subsidiaries, including LSI Logic HK Holdings, desire to receive from SCI, andSCI agrees to provide to LSI and its subsidiaries, including LSI Logic HK Holdings, certain wafersupply, test, and related services to be performed by SCI at the semiconductor wafer fabricationfacilities in Gresham, Oregon.**Agreement**The Parties, intending to be legally bound, agree as follows:**1.****Definitions**. Any capitalized term that is used but not expressly defined in thisAgreement will have the same meaning in this Agreement as the meaning (if any) given to such termin the Asset Purchase Agreement. For purposes of this Agreement:     **1.1**“**Change of Control**” means, with respect to a Party (or ON), the occurrence of any of thefollowing events: (a) any consolidation or merger of such Party (or ON) with or into any otherentity in which the holders of such Party’s (or ON’s) outstanding shares immediately before suchconsolidation or merger do not, immediately after such consolidation or merger, retain stockrepresenting a majority of the voting power of the surviving entity or stock representing amajority of the voting power of an entity that wholly owns, directly or indirectly, the survivingentity; (b) the sale, transfer, or assignment of securities of such Party (or ON) representing amajority of the voting power of all of such Party’s (or ON’s) outstanding voting securities to anacquiring party or group, in a single transaction or a series of related transactions; or (c) thesale of all or substantially all of such Party’s (or ON’s) assets. In addition, in the case ofSCI, a
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“Change of Control” also means and includes any transaction or series of transactions as aresult of which ON no longer has the power or authority to control and direct the business oraffairs of SCI.     **1.2**“**COT Wafers**” means Wafers designed and/or manufactured in connection with LSI’s customerowned tooling program.     **1.3 “Die”**means an individual integrated circuit product as fabricated or to be fabricated ona silicon Wafer.     **1.4 “Effective Date”**means the Closing Date.     **1.5 “GflxTM Process Technology**” means the 0.11 micron process technology jointly developed byLSI and TSMC that is commonly referred as the “Gflx” process technology.     **1.6**“**Hot Lot**” means an expedited level of manufacturing Wafer Lots that is considered to be apriority 2 level of processing that results in cycle times shorter than the standard cycle time butlonger than the cycle time for Super Hot Lots.     **1.7**“**In-Process Wafers”**has the meaning set forth in Section 2.4.     **1.8**“**Licensed Material**” means all information and materials (including process technology andspecifications, recipes and procedures related to the design, manufacture, testing, quality,functionality and performance of the Products or the provision of the Services), owned by LSI (orwith respect to the applicable portions of the Gflx Process Technology, licensed to LSI by TSMC)and furnished by LSI to SCI for use in connection with the manufacture of the Products or theperformance of the Services, including the Specifications, mutually agreed upon updates andamendments to the foregoing, and the Tooling     **1.9**“**LSI’s Requirements**” means the quantity and type of Products and Services that areactually ordered by LSI or its Subsidiaries pursuant to this Agreement, subject to the limitationson Orders described in Sections 4.1, 4.2, 4.3, and 4.4.     **1.10**“**Metallization Processing**” means the step in the fabrication of a Wafer in which properinterconnection of circuit elements is made.     **1.11 “ON”**means ON Semiconductor Corporation, a Delaware corporation and SCI’s parent company.     **1.12 “On-Time Delivery”**means between [*] prior to the LSI requested delivery date and [*]later than LSI’s requested delivery date; provided however, that up to [*] of deliveries in any [*]can be delivered [*] than LSI’s requested delivery date and ON will still be considered to havesatisfied its On-Time Delivery obligations.     **1.13**“**Order**” has the meaning set forth in Section 4.6.     **1.14**“**Products**” means semiconductor Wafer products, in Die in Wafer form
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(“DWF”) or Wafers as Ordered by LSI, (a) of the type currently being manufactured at theGresham Facilities as of the Effective Date, (b) that are capable of being manufactured at theGresham Facilities based on the Wafer fabrication process technologies for which the GreshamFacilities are currently qualified as of the Effective Date (including LSI’s C9, G10, G11, G12,CMOS35, CMOS25, and CMOS18 process technologies and, as set forth in Section 2.6(a) the GflxTMProcess Technology as in intended to be qualified), and includes COT Wafers and RapidChip®Products, and (c) semiconductor Wafer products that are capable of being manufactured at theGresham Facilities based on Wafer fabrication process technologies for which the Gresham Facilitiesare qualified after the Effective Date. Any semiconductor Wafer products that SCI agrees tomanufacture or process at the Gresham Facilities for LSI or its Subsidiaries during the term ofthis Agreement will automatically be deemed included in the definition of “Products.”     **1.15**“**Proprietary Rights**” means and includes all: (a) rights associated with works ofauthorship (whether or not registered), including copyrights and mask work rights, (b) patentrights, (c) trade secret rights, and (d) other types of legally recognized rights in intangibleassets (other than trademark and service mark rights, trade dress rights, trade name rights, andsimilar rights) except as may be necessary for SCI to affix certain LSI trademarks on the Productsas requested by LSI, and (e) all registrations, renewals, extensions, combinations, divisions, orreissues of, and applications for, any of the rights referred to in clauses (a) through (d) above.     **1.16**“**Qualified Purchases**” means all amounts paid by LSI (or any of LSI’s Subsidiaries) forProducts or Services under this Agreement, including for purchases of COT Wafers and all amountspaid by LSI for adders, premiums and other charges associated with the SCI’s furnishing of Productshereunder, but excluding payments made by LSI to ON or SCI under the Facilities Use Agreement orTransition Services Agreement and payments for Implant Adders. Also excluded are credits forIn-Process Wafers, Raw Wafers, Quartz and Targets (per Attachment B-2, paragraph 4.0) attime of Closing. The amount of any such credits will be added back to the TMPA and the QMPA forthe applicable quarter at the time the credit is issued. A Qualified Purchase will be deemed tohave occurred, and will be counted for purposes of determination of LSI’s fulfillment of any QMPA,with respect to Products, upon the earlier of the agreed upon On-Time Delivery date or the initialshipment of the Product in question, regardless of whether a Product may later be rejected orreturned, or with respect to Services, upon performance of the Service in question.     **1.17**“**Quarter**” means a LSI fiscal quarter.     **1.18 “Quarterly Minimum Purchase Amount”**or **“QMPA”**has the meaning set forth in Section 3.1.     **1.19 “RapidChip® Product”**means an integrated circuit manufactured using a RapidChip® Slicewith the top metal layers applied to the RapidChip® Slice.     **1.20 “RapidChip® Slice”**means a partially manufactured integrated circuit in which all siliconbased layers have been built based on LSI’s proprietary RapidChip®
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technology but which does not include the top metal layers.     **1.21**“**Reticles**” means the photomasks that are used to manufacture the Products.     **1.22**“**Revenue Commitment Period**” means the period beginning on the Effective Date and endingon (and including) the second anniversary of the Effective Date.     **1.23**“**Services**” means the Wafer sort test services, Wafer processing services, MetallizationProcessing services, expedited Wafer processing services, engineering services, probe cardmaintenance services, inventory storage services, quality assurance services, services relating toCOT Wafers, and other similar and related services that LSI may from time to time request SCI toperform by means of an Order, purchase order release, or similar document.     **1.24 “Specifications”**has the meaning set forth in Section 8.1.     **1.25 “Subsidiary”**of a Party means any other Person of which (or in which) an amount of thevoting securities or other voting ownership interests sufficient to elect at least a majority ofsuch other Person’s board of directors or other governing body (or, if there are no votinginterests, more than 50% of the equity interests of which) is directly or indirectly owned orcontrolled by such Party.     **1.26**“**Super Hot Lot**” means an expedited level of manufacturing Wafer Lots that is consideredto be a priority 1 level of processing that results in cycle times shorter than the cycle time forHot Lots.     **1.27 “Total Minimum Purchase Amount”**or **“TMPA”**has the meaning set forth in Section 3.1.     **1.28 “TSMC”**means Taiwan Semiconductor Manufacturing Co., Ltd.     **1.29 “Wafer”**means a crystalline substrate for integrated circuit fabrication which when fullyprocessed may consist of several potential finished Die.     **1.30 “Wafer Lot”**means a batch or lot of Wafers that are processed at the same time. EachWafer Lot (or number of Die as converted to Wafers) to be Ordered by LSI and processed by SCI forLSI and its Subsidiaries will consist of a minimum of 24 Wafers, except as other wise provided inthis agreement in Section 5.6(c).**2.****Supply Obligation**. Using the Gresham Facilities, SCI will manufacture and provide theProducts to LSI and perform the Services according to the terms and conditions in this Agreement.It is expressly understood that the quality and performance standards and requirements set forth inthis Agreement are intended to represent the operating experience and capability of the GreshamFacilities’ operations as conducted by LSI immediately prior to the Closing (the “ReferencePoint”). In the event that SCI reasonably and with adequate specificity demonstrates, and sonotifies LSI in writing within ninety (90) days after the Reference Point, that the actualoperating capability and
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performance of the Gresham Facilities’ operations as of the Reference Point are inferior to thatrequired for performance to any of such standards or requirements specified herein such that SCI’sperformance hereunder is adversely impacted to a material extent, at SCI’s request the Partiesshall in good faith modify such standards or requirements so as to reflect the actual operatingcapability and performance of the Gresham Facilities’ operations as of the Reference Point. It isfurther understood that for a limited period after the Effective Date SCI will require certainassistance under the Transition Services Agreement. If an issue arises under the TransitionServices Agreement that adversely impacts SCI’s ability to perform under this Agreement, theparties will discuss in good faith resolution of the issue.     **2.1 Products**. During the term of this Agreement, subject to the mix limitations in Sections4.1, 4.2 and 4.3 and the capacity limitations in Section 4.4, SCI will supply LSI with LSI’sRequirements for Products. If LSI requests that SCI manufacture and provide to LSI Products thatare not of the type manufactured or capable of being manufactured at the Gresham Facilities as ofthe Effective Date but are capable of being manufactured at the Gresham Facilities as of the dateof LSI’s request, including but not limited to certain Products LSI procures from [*] in [*], theParties will mutually agree in writing on the lead times, acceptable yields and defect densities,and other applicable quality and functional requirements and specifications for such products andthereafter such products will automatically be deemed to be Products under this Agreement and theagreed-upon lead times, acceptable yields and defect densities, and other applicable quality andfunctional requirements and specifications will be deemed to be Specifications under thisAgreement. SCI is not required to perform process development work for new technology platforms.The addition of products using processes not being run at the Gresham Facilities as of theEffective Date is subject to mutual agreement. Any process development costs for such additionalproducts will be discussed in good faith between the Parties.     **2.2 Wafer Sort Test Services**. SCI will perform Wafer sort test services on all applicableProducts produced for LSI or its Subsidiaries at the Gresham Facilities and on Productsmanufactured by a third party for LSI or its Subsidiaries and delivered by LSI or any of itsSubsidiaries to SCI for processing by SCI. LSI will provide all necessary test programs to SCI inorder to provide the Wafer sort test services.     **2.3 Testing by LSI**. SCI will allow LSI’s test engineers access to and use of the testequipment at the Gresham Facilities during the day shift normal working hours, and such other daysand/or times as LSI may reasonably request, under mutually agreeable arrangements and will providetest operator support for LSI’s test engineers. The hourly rate for engineering test time will bethe same as the rate for production testing. The Parties will establish a mutually agreeableschedule by which LSI’s test engineers will have access to and use of such test equipment, updatedmonthly. If LSI requires additional test time that is not reflected in the applicable schedule,than LSI (in cooperation with SCI) will set priorities between delivery of Products and test time.If unscheduled test time impacts On-time Delivery, then any impacted delivery dates will beappropriately reset so that SCI will not be penalized for failing to deliver in accordance with theoriginal delivery dates.
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     **2.4 In-Process Wafers**. SCI will finish processing all Products that are in the process ofbeing fabricated at the Gresham Facilities as of the Effective Date (“In-Process Wafers”) inaccordance with LSI’s schedule and requirements for such Products. All In-Process Wafers willremain LSI’s property at all times while at the Gresham Facilities.     **2.5 Metallization Processing**. LSI will cause its supplier of RapidChip® Slices to deliverquantities thereof to SCI at the Gresham Facilities. SCI will accept deliveries of such RapidChip®Slices and hold them in safekeeping as consigned materials until Metallization Processing isordered by LSI. Thereupon SCI will perform the Metallization Processing and other Servicesrequested by LSI for RapidChip Products® in accordance with the applicable LSI specifications. Inthe event it is determined after SCI has commenced Metallization Processing of a Slice that suchSlice was defective when received by SCI and SCI has properly performed the MetallizationProcessing and other Services ordered by LSI for such Slice, SCI shall be entitled to payment forthe Metallization Processing and other Services performed by SCI.     **2.6 Supported Technologies**. At a minimum under this Agreement SCI will support andmanufacture Products for LSI using the following technologies:          **(a)***Process Technologies.*Subject to Section 14.2 below, for the Initial Term SCI willsupport the C9, G10, G11, G12, CMOS35, CMOS25, and CMOS18 process technologies and the GflxTMProcess Technology at the Gresham Facilities. In the event the full qualification of the GflxTMProcess Technology has not occurred as of the Effective Date, SCI will support the completion ofsuch qualification in accordance with the requirements of LSI’s qualification plan. A summary ofLSI’s Gflx qualification plan requirements is set forth as Attachment J hereto.          **(b)***Rapid Chip Manufacturing.*Subject to Section 14.2 below, for the term of this AgreementSCI will support manufacture at the Gresham Facilities of RapidChip® Products using both the G12process technology and the GflxTM Process Technology, which includes the following obligations:pre-fabrication of the RapidChip® Slices and storage of RapidChip® Slices in inventory for furtherprocessing at a later date, storage of RapidChip® Slices fabricated using the GflxTM ProcessTechnology by a third party designated by LSI for subsequent Metallization Processing at theGresham Facilities, and Metallization Processing of the RapidChip® Slices manufactured at theGresham Facilities or by a such third party pursuant to expedited cycle times and fees as requestedby LSI and agreed to by SCI.          **(c)***LVR.*When requested by LSI, SCI will use low volume Reticles (LVR) for Wafer processing.Additionally:          (i) *Non-RapidChip Products:*Once a particular Product has an actual history volumetotaling [*] for G12 and [*] for Gflx and a forecast of consistent reasonable ongoingvolumes for the particular Product, then LSI shall provide a full volume Reticle set. Thenumber of LVRs shall be limited to no more than the average for the [*] prior to theEffective Date.
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          (ii) *RapidChip Products:*Both SCI and LSI recognize that RapidChip Products willrequire support of LVR Reticles for Wafer processing. SCI will continue to use LVR Reticlesfor such RapidChip Products until such time that LSI anticipates there will be consistentand adequate future volumes for any such RapidChip Product, at which time an HVR set willbe purchased by LSI. Attachment B-1 has separate pricing for HVR (when usedinstead of LVR).          **(d)***ITAR Flow Procedures.*Subject to Section 14.2 below, for the term of this Agreement SCI,at its cost, will support the ITAR process flow requirements and support LSI’s military andaeronautical business (i.e., the manufacture of integrated circuits for military and aeronauticalapplications) at the Gresham Facilities.          **(e)***Experimental Requests.*For the term of this Agreement, SCI will support LSI’srequirements for skew lots, DOE and other engineering-related experimental requests by LSI. SCIwill support special skews requested by LSI, including combined poly and implant for mixed signaland for opposite process corner comparison (e.g. strong N- /weak-P). The additional cycle timerequired for processing any such experimental requests shall be incrementally added to thecommitted cycle times as defined in Attachment C.          **(f)***New Designs.*For the term of this Agreement, SCI will accept from LSI and itsSubsidiaries Orders for Products based on new designs for prototype production and volumeproduction to be manufactured using any of the process technologies available at the GreshamFacilities. As new Products are included in LSI’s Requirements, the pricing for such Products willbe based on the pricing for other Products manufactured using the applicable process technology setforth in Attachment B at the time Orders for such Products are placed. LSI may transferProducts, and the associated Reticles for such Products, from the third party’s facility in Japanreferred to in Section 2.1 above as new designs for manufacturing at the Gresham Facilities.Attachment E sets forth the applicable micro-capacity for Products using such transferredReticles.     **2.7 Second Source**. If at any point during the Revenue Commitment Period LSI believes it needsa second source for any Products, LSI will notify SCI of such need and the Parties will discuss thematter in good faith.     **2.8 Direct Relationship with Customer**. LSI has relationships with certain ARO customers(including certain process flows and the [*]). SCI agrees to continue to support suchrelationships either by providing the Products and Services to LSI under this Agreement (in whichcase LSI will continue to have the direct customer relationship with the ARO customers) or until,as soon as reasonably practicable and subject to the agreement of each ARO customer, SCI takesdirect customer responsibility for such customers.**3.****Purchase Requirements**     **3.1 Minimum**. Subject to the terms and conditions of this Agreement and provided that SCIfulfills all of its material obligations under this Agreement (including
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its material obligations under Sections 2, 4, 7, and 8), LSI will ensure that it and itsSubsidiaries collectively make a minimum amount of one hundred ninety-eight million, eight hundredthousand dollars ($198,800,000) of Qualified Purchases (the “Total Minimum Purchase Amount” or“TMPA”) during the Revenue Commitment Period. At the end of the Revenue Commitment Period, theTMPA will be deemed satisfied if LSI and its Subsidiaries have made an aggregate amount ofQualified Purchases at least equal to the TMPA. In addition, during the Revenue Commitment PeriodLSI will ensure that it and its Subsidiaries make Qualified Purchases in amounts at least equal tothe quarterly minimums set forth in Attachment A, as such minimums may be adjusted pursuantto Section 3.2 (the “Quarterly Minimum Purchase Amount” or “QMPA”). All Qualified Purchases placedduring a given Quarter will be totaled to determine if the applicable QMPA has been met. AllQualified Purchases made during the Revenue Commitment Period will be totaled to determine if theTMPA has been met. After the Revenue Commitment Period, SCI will continue to supply LSI’sRequirements for Products and Services from the Gresham Facilities in accordance with the terms andconditions of this Agreement; provided, however, LSI will no longer have any obligation to make aminimum amount of Qualified Purchases and the TPMA or QPMA will no longer apply.     **3.2 Reconciliation of QMPA**. At the end of each Quarter during the Revenue Commitment Period,LSI will provide SCI with a written report stating the actual amount of Qualified Purchases made byLSI and its Subsidiaries in that Quarter and the QMPA for that Quarter and any difference betweenthe amount of Qualified Purchases in the applicable Quarter and the QMPA for that Quarter. If theinitial and final Quarters are not complete Quarters, the applicable QMPA will be apportioned onthe basis of a 13 week Quarter (e.g., if the QMPA for the second Quarter of 2006 is [*] and thereare 10 weeks remaining in the second Quarter of 2006 when this Agreement is signed, the QMPA forthe second Quarter of 2006 will be reduced by a factor of 10/13 from [*] to [*] and the difference[*] will become the QMPA for the first three weeks of Q2-08).          **(a)***Excess*. If the amount of LSI’s and its Subsidiaries’ Qualified Purchases during a givenQuarter is greater than the QMPA for that Quarter, the amount by which the Qualified Purchasesexceeds the applicable QMPA, but only up to [*] of that Quarter’s QMPA, will be carried over andadded to the amount of Qualified Purchases made by LSI and its Subsidiaries in the next subsequentQuarter as if made in that Quarter and counted toward the QMPA for that Quarter. (See the exampleset forth in Attachment B-3.)          **(b)***Shortfall*. If the amount of LSI’s and its Subsidiaries’ Qualified Purchases during agiven Quarter is less than the QMPA for that Quarter, LSI will pay to SCI, within 30 days after theend of the Quarter, an amount equal to the portion of the shortfall (if any) that is greater than[*] of that Quarter’s QMPA, and the remainder of the shortfall (up to [*] of that Quarter’s QMPA)will be added to the QPMA for the next Quarter, resulting in the QMPA for the next Quarter beingequal to the amount of the QMPA set forth in Attachment A plus the amount of the shortfallup to [*] of the previous Quarter’s QMPA. (See the example set forth in Attachment B-3.)          **(c)***Reconciliation of TMPA*. At the end of the Revenue Commitment Period or the end of thefirst subsequent Quarter thereafter in the event of a shortfall in
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the last Quarter of the Revenue Commitment Period and the applicability of Section 3.2(b)above, the Parties will perform a final reconciliation of the sum of (i) LSI’s and itsSubsidiaries’ total amount of Qualified Purchases during the Revenue Commitment Period and (ii) thetotal amount of shortfall payments made (or, for the final Quarter, to be made) pursuant to Section3.2(b) against the TMPA. Except with respect to the extent that LSI’s obligation to fulfill anyQMPA has been adjusted, deferred or excused pursuant to paragraph (d) below, if such sum, as mayhave been so adjusted, is less than the TMPA, then the difference will be paid by LSI to SCI within30 days after the Parties complete such reconciliation.          **(d)***Adjustments to TMPA and QMPA.*LSI’s obligation to fulfill the TMPA and any QMPA may beadjusted, deferred or excused pursuant to circumstances as follows:               **(i) **In the event that during the Revenue Commitment Period, the On-Time Delivery date is notmet by SCI, but LSI’s customer will still accept a later delivery of the finished version of suchProduct, LSI, at its sole discretion, may reduce the QMPA for the Quarter in which the Product wasto be delivered and increase the QMPA for the Quarter during the Revenue Commitment Period in whichthe Product is delivered to LSI by the applicable amount. In the event delivery to LSI’s customeris delayed beyond the end of the Revenue Commitment Period, the reconciliation of the TMPA andapplicable QMPA will include a reduction to such extent.               **(ii) **In the event that during the Revenue Commitment Period SCI would be more than two weekslate in making an On-Time Delivery (“Late Delivery” solely for purposes of this paragraph (d)) ofany Product and the order for the finished version of such Product from LSI’s customer has beencancelled, the QMPA will be reduced by the Late Delivery portion of LSI’s Order and LSI will usecommercially reasonable efforts to place other Orders for an equivalent amount within the RevenueCommitment Period or within two (2) years thereafter. In the event LSI has not placed an order forsuch equivalent amount before the end of the Revenue Commitment Period, the reconciliation of theTMPA and applicable QMPA will include a reduction to such extent.               **(iii) **In the event that LSI returns any Product to SCI due to the non-conformity of theProduct for which LSI is entitled to a credit or a refund and LSI’s customer for the finishedversion of such Product will accept a replacement finished version of such Product, the purchaseprice for such replacement Product will not be counted towards the QMPA or TMPA.               **(iv) **In the event that LSI returns any Product to SCI due to the non-conformity of the Productfor which LSI receives a credit or a refund and LSI’s customer for the finished version of suchProduct will not accept a replacement finished version of such Product, LSI will make commerciallyreasonable efforts to place other Orders for an equivalent amount of such credit or refund withinthe Revenue Commitment Period or within two (2) years thereafter. LSI’s fulfillment of theapplicable QMPA when such non-conforming Product was shipped will not be affected in any manner.
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**4.****Forecasts and Ordering**     **4.1 Forecasts**. Beginning on the Effective Date and continuing thereafter on a monthly basis,LSI will provide SCI with a [*] rolling forecast by Wafer starts of LSI’s Requirements by processtechnology for such period (the “Forecast”).          **(a)**The Forecast will be provided by Wednesday in the fourth week of every LSI fiscal month.Subject to LSI’s rights to make certain adjustments the [*] of the Forecast will be fixed (“BindingForecast”). During (i) the [*] of the Forecast LSI shall have the right to adjust the BindingForecast amounts upwards or downwards by up to [*] of the total number of Wafer starts stated inthe Binding Forecast for such [*]; (ii) the [*] of the Binding Forecast LSI shall have the right toadjust the Binding Forecast amounts upwards or downwards by up to [*] of the total number of Waferstarts stated in the Binding Forecast for such [*]; and (iii) the [*] of the Binding Forecast LSIshall have the right to adjust the Binding Forecast amounts upwards or downwards by up to [*] ofthe total number of Wafer starts stated in the Binding Forecast for such [*]; provided, however,LSI may not make any increases in the Forecast amounts that would exceed the micro-capacityconstraints identified in Attachment E or the availability of resources and raw materialsnecessary to manufacture the Products and perform the Services.          **(b)**The [*] of the Forecast will not be binding on LSI, will be subject to adjustment at LSI’sdiscretion, and will identify monthly demand for LSI’s Requirements for planning purposes only.Once per Quarter the Parties will review the forecasted capacity loadings, and the availability ofresources and raw materials to determine what, if any, additional capacity is available in excessof any previous Forecast amount.          **(c)**In no event does the exercise by LSI of its right to make any of the adjustments providedby (a) or (b) above to the Forecast relieve LSI from its obligations to meet the TMPA andapplicable QMPA.     **4.2 Process Technology Mix**. In addition to LSI’s right to increase or decrease the amounts ofthe Binding Forecast as described in Section 4.1, if LSI requests changes to the process technologymix (i.e., the quantity of Products to be manufactured using each distinct process technology)within the Binding Forecast period, SCI will make reasonable efforts to accommodate the requestedchanges, taking into consideration available capacity for the relevant process technology andavailability of materials. Unless SCI agrees otherwise, the mix of process technologies used tomeet LSI’s Requirements set forth in the Forecasts will fall within minimum and maximum weeklystart rates for each process technology to be agreed upon by the Parties during the forecastingprocess for Products, and in any event will not exceed the individual micro-capacities of theprocess technologies referred to in Section 4.4.     **4.3 Product Mix**. Attachment A, which sets forth LSI’s initial estimates made as ofthe Effective Date regarding the mix of Products and Services to be ordered by LSI during theRevenue Commitment Period also reflects the Parties’ minimum assumptions regarding Wafer capacityfor LSI’s Requirements and the fulfillment of the applicable QMPA and TMPA by LSI. It isacknowledged that in order for LSI to fulfill
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its QMPA and TMPA, additional Product run rates will be required, which will be ascertainedpursuant to the Forecasts provided by LSI under Section 4.1. The estimates set out inAttachment A are not binding on LSI with respect to any subsequent Forecast or Order forthe production of specific Products or Services. LSI has the right to make changes to thisestimated mix of Products and Services when it places Orders, provided, however, LSI will remainobligated to fulfill the TMPA and applicable QMPA.     **4.4 Capacity**. During the Revenue Commitment Period, SCI will ensure that sufficient capacityat the Gresham Facilities is reserved and available at all times to meet LSI’s Requirements. Afterthe Revenue Commitment Period, the Parties will meet on a Quarterly basis to determine the maximumcapacity of the Gresham Facilities that will be allocated to LSI; *provided, however,*that SCI willmake commercially reasonable efforts to allocate (taking into account SCI’s other capacity needs atthat time on a *pari passu*basis) maximum capacity to LSI that is at least [*] of the average weeklyWafer start capacity actually used by LSI for the Quarter having the highest number of Orders forWafer starts submitted by LSI out of the previous [*]. **(**See the example set forth inAttachment B-3.) The process technologies and related mix thereof set forth in an Orderwill take into consideration, and not exceed, the capacity allocated to LSI as so agreed to by bothParties from time to time, as well as individual micro-capacities of the process technologies andall other capacity limitations agreed to by the Parties in writing. Attachment E setsforth the process technology micro-capacities at the Gresham Facilities as of the Effective Date.Notwithstanding the foregoing, nothing in this Agreement will limit LSI’s right to submit Ordersfor Products that have been discontinued pursuant to Section 14.2. If LSI requests capacityincreases that would require additional capital expenditures by SCI, then the Parties will discussin good faith options for putting in place the additional capacity (e.g., LSI may consign equipmentto SCI or if LSI purchases the equipment, then SCI will rebate the depreciation expense (usingLSI’s applicable useful life) through a reduction to the applicable Wafer or Die price as set forthin Attachment B-1). In the event additional employees would be required to supportproduction of additional LSI demand, SCI will exercise its reasonable best efforts to hire andemploy such additional employees to support the increased demand.     **4.5 Minimum Supply of Raw Materials**. SCI will maintain adequate inventories of raw materialsin order to fulfill the volumes as set forth in the Binding Forecasts provided by LSI. SCI willhave the right to invoice LSI for SCI’s actual purchase cost for any raw substrates that are uniqueto LSI’s specifications purchased by SCI against the Binding Forecasts, which are not required tomeet LSI’s actual Orders and are not used within [*] of delivery of the substrates to SCI. Theforegoing states LSI’s entire obligation and SCI’s entire remedy with respect to excess rawmaterials purchased by SCI if LSI fails to place Orders for Products or Services sufficient to meetthe Binding Forecast. If conditions occur that will require SCI to enter into long term take orpay type arrangements with suppliers to secure the supply of raw materials, then the Parties willdiscuss and resolve in good faith the allocation of obligations and risk under such arrangements.     **4.6 Purchase Orders**. LSI will submit to SCI weekly purchase order releases containing Diedemand or Wafer demand instructions that identify the Products, the
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quantity of Products and the applicable process technologies for such Products that are to beshipped to LSI, showing the required shipment date, the address for delivery of the completedProducts, and any other information applicable to the Products (each such release, an “Order”).All Orders meeting the requirements of Sections 4.2 and 4.3 and consistent with the BindingForecast and agreed upon cycle times shall be accepted by SCI and confirmed to LSI within [*]. Forall Products involving RapidChip® Slices to be delivered to the Gresham Facilities, SCI cannotcommit to a delivery date unless such RapidChip® Slices are on-hand or a projected delivery datefor the requisite RapidChip® Slices to the Gresham Facility has been provided. The On-TimeDelivery date for any such Product will be reset to the extent the RapidChip® Slices are receivedlater than the projected delivery date to the Gresham Facility. All other Orders will be deemedaccepted by SCI unless LSI receives a written notice of rejection (stating the reason or reasonsfor such rejection) within [*] after LSI submitted the Order to SCI. LSI’s Subsidiaries will havethe right to submit Orders under this Agreement and all such Orders will be counted as if placed byLSI for the purposes of the Qualified Purchases, Binding Forecasts, Forecasts, and all otherpurchase requirements of LSI. LSI represents that it has the authority to cause its Subsidiariesto place Orders with SCI under this Agreement and to comply with the terms and conditions of thisAgreement when placing Orders with SCI, and LSI will cause its Subsidiaries to comply with theterms and conditions of this Agreement when placing Orders with SCI. LSI will order Products in[*] Wafer lot sizes. Die scheduling will be lot sized by LSI prior to placing Orders.          **(a) Changes**. LSI may, from time to time after submission of an Order, provide written noticeto SCI proposing changes to the applicable Order (a “Change Proposal”). Following delivery andreceipt of the Change Proposal, the Parties will promptly discuss appropriate modifications to theapplicable Order (including any changes in the delivery or production schedule or to the pricingfor the Products and Services that are the subject of the Change Proposal). If the Change Proposalpostpones delivery of Products or Services identified in the Order and SCI has not begun of themanufacture of the applicable Products or performance of the Services, such Change Proposal will bedeemed accepted by the Parties and SCI will implement the Change Proposal. If the Change Proposalpostpones delivery of Products or Services identified in the Order and SCI has begun manufacture ofthe applicable Products or performance of the Services, such Change Proposal will be deemedaccepted by the Parties and SCI will continue manufacture of the Products or performance of theServices and with respect to the Products, upon completion will hold the completed Products andcompleted work product with respect to the Services in inventory until the requested delivery date.Similarly, if a Change Proposal requests partial manufacture of a Product, so long as SCI has notmanufactured the Product past the point specified in the Change Proposal, such Change Proposal willbe deemed accepted by the Parties and SCI will complete partial manufacture of a Product and holdthe Product in inventory until needed by LSI. If SCI is required to hold any Products such holdwill not exceed [*] or available storage capacity limitations. After [*], SCI will requestinstructions from LSI (i) to complete production of such Products and ship them as finishedProducts, (ii) to ship such Products to LSI in their partially processed condition or (iii) tocancel further production of such Products. SCI shall perform in accordance with LSI’sinstructions and thereafter invoice LSI for the appropriate Wafer price or the charge for partialprocessing or cancellation as
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appropriate in accordance with the terms of this Agreement.          **(b) Cancellation**. LSI may cancel any Order or a portion thereof without charge, to the extentthat the portion being cancelled has not been started. LSI may cancel any Order or portion thereofthat has been started, but will be required to pay a cancellation charge to SCI reflecting thepercentage of manufacturing completion (see Attachment B-2) of the Products being cancelledmultiplied by the applicable price. Any such cancellation charges during the [*] of this Agreementwill be credited towards LSI’s fulfillment of the TMPA and applicable QMPA when such cancellationcharges occur.     **4.7 No Adjustment for Defective Products**. If LSI cancels all or any part of an Order orreturns any Products as permitted under Section 6.1, Section 11.2(c), or Section 15.9, the amountof such cancelled Order or returned Products will be counted toward LSI’s fulfillment of the TMPA,the applicable QMPA, and the applicable Binding Forecast.**5.****Pricing; Payment; and Delivery**     **5.1 Product Pricing.**Attachment B-1 to this Agreement sets forth the prices for theWafers based on the applicable process technologies used to manufacture the Product and the pricesfor the process adders for optional processing steps. The date applicable to such pricing shall bebased on the LSI requested delivery date or the actual delivery date, whichever is later. Inaddition:          **(a)**For Products for which [*] Wafers within the prior [*] of an Order being placed have beenmanufactured on a stable process platform, statistical post processing (“SPP”) algorithm (ifapplicable), and sort test program, Die based pricing will be used. An initial list of Products isset forth in Attachment B-6. Such Die based pricing will be determined using the sortyield, or post SPP yields if applicable, for such Product of the most [*] prior to when the Productis to be manufactured as applied to the applicable Wafer pricing for such Product set forth inAttachment B-1. The applicable Die or Wafer pricing to which such post SPP yield data isapplied will be pricing applicable to the Quarter in which delivery of the Product to LSI is made.The NDPW used for Die based pricing will be based on section 5.2 below. For Products with [*]Wafers produced, Wafer based pricing will be used until such time that [*] Wafers will have beenproduced, and thereafter subsequent Orders will be based on Die based pricing. These prices applyto all of LSI’s purchases of the applicable Products made during the Revenue Commitment Period.After the Revenue Commitment Period, the Parties will meet on a quarterly basis to review thepricing and to negotiate in good faith, as the case may be, price decreases, as are justified byreference to external Wafer pricing market data (e.g. Selantek), or price increases, as arejustified based on unforeseen and substantial cost increases then being generally experienced bysemiconductor manufacturers to the extent such cost increases are also reflected in such externalmarket data.          **(b)**For Products for which LSI requires bumping, Wafer prices as set forth in AttachmentB-1 will be used for such Products; provided, however, for bumped Wafer Products for which [*]Wafers have been manufactured, if the actual Die yields for
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such Products, (after bump and sort yield or SPP as applicable) is lower than the expectedNDPW due to a Wafer processing cause, LSI shall be entitled to a credit for the shortfall in theactual NDPW as compared to the expected NDPW. Similarly, for bumped Wafer Products for which [*]wafers have been manufactured, if the actual Die yields for such Products (after bump and sortyield or SPP as applicable) is higher than the expected NDPW, SCI shall be entitled to invoice LSIfor the excess in the actual NDPW as compared to the expected NDPW.          **(c)**If the actual number of Die manufactured (for Die Orders) or Wafers manufactured (forWafer Orders) is greater than the actual quantity LSI ordered, SCI will only ship to LSI the numberof Products equal to the nearest half or full lot size ordered by rounding up.          **(d)**If the actual number of Die manufactured (for Die Orders) or Wafers manufactured (forWafers Orders) is less than the actual quantity LSI ordered, SCI shall promptly notify LSI of suchfact. LSI, at its sole discretion, may cancel such Order to the extent of such quantity that wouldnot be delivered in a timely manner and in the event that LSI’s cancellation made pursuant toSection 11.2, the Wafer price amount(s) applicable to such cancelled Order quantity will be deemedto be Qualified Purchases. In the event LSI still desires delivery of the full quantity per theOrder to be made, SCI will promptly start the appropriate quantity of Wafers for delivery of suchDie or Wafer shortfall and expedite the production and delivery of such Wafers to LSI withoutadditional charges.**5.2 Calculation of Product Pricing**          **(a)***Setting NDPW*. Prices for the Products are based on the actual number of Wafers thatsatisfy post SPP yield to be agreed upon by the Parties. When [*] Wafers of a Product that satisfysuch agreed-upon post SPP yield and have been produced at the Gresham Facilities (including Wafersproduced prior to the Effective Date), a “Net Die per Wafer” or “NDPW” yield factor will beestablished by the Parties based on the average post SPP yield of the applicable Product for the[*] preceding the date the NDPW yield factor is being established. The NDPW yield factor for thoseProducts that as of the Effective Date have had [*] Wafers produced at the Gresham Facilities isset forth in Attachment B. When the [*] Wafers of additional Products have beenmanufactured, NDPW yield factor for such additional Products will be established and agreed upon bythe Parties; Attachment B will be updated accordingly.          **(b)***Price per Good Die*. When the NDPW yield factor is established for a Product, the pricefor each good Die will be determined based upon a formula. The Parties will review and recalculatethe NDPW yield factors and the good Die prices for each applicable Product once per Quarter. Thefollowing Products, [*], [*] and [*], including any revisions thereof, are an [*]. These Productswill be priced based on the post SPP NDPW as of the Effective Date. Once these [*] are completeand LSI’s [*] therefor has [*] for these Products, the NDPW will be immediately adjusted based onthe [*] Wafers and the Die pricing will be adjusted accordingly. LSI will [*] of the new Die priceon these Products. The Parties will review and recalculate the NDPW yield factor and the Die pricefor all other Products once per quarter. If the NDPW yield factor for a
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Product increases as a result of any such quarterly review, a revised price per good Die willpromptly be determined for such Product based upon such formula and applied as the new price forall applicable Wafer starts made thereafter. If the increase in the NDPW yield factor at any suchreview is [*], the revised price per good Die will be calculated so that [*] of the price decreaseis shared with SCI (i.e., the price per good Die paid by LSI will be decreased by [*] of the amountit would have decreased based on upon the pricing formula). NDPW yield factor decreases will notresult in a price reduction. (See the example set forth in Attachment B-3**.**)          **(c)***Changes in Sort Test Programs or SPP Algorithms.*Pricing will be adjusted as follows:(i) if LSI makes changes to the sort test program or SPP algorithm for test coverage that resultsin a reduction in NDPW unrelated to existing manufacturing or process methodologies, the Diepricing will be adjusted accordingly, (ii) if LSI makes changes to the sort test program or SPPalgorithm due to customer requirements that result in a reduction in NDPW that is unrelated toexisting manufacturing or process methodologies, the Die pricing will be adjusted accordingly, or(iii) if LSI makes changes to the sort test program or SPP algorithm that results in NDPW as aresult of changes made to the existing process by SCI after the Effective Date or manufacturing orworkmanship issues unrelated to the process as defined on the Effective Date, the Die pricing willnot be adjusted. In all cases, SCI will work with LSI to improve yields and take actions to returnthe yield back to the original NDPW.          **(d)***Changes in Test Times.*If LSI makes any change in a test program that increases ordecreases the test times to sort a Product, the applicable Die price will be adjusted upwards ordownwards on all Products to which such changed test time is applied.          **(e)***Low Volume Production.*Once volume for any given technology (e.g., C9, G10, G11, G12 orGflx) drops below [*] Wafers per [*], all Products running on that technology shall revert Waferpricing.          **(f)***Die Pricing.*If at any time during this Agreement, SCI determines that the administrativetime and costs associated with maintaining Die pricing is unduly burdensome, it will notify LSI andthe Parties will negotiate a resolution in good faith.     **5.3 Wafer Sort Test Services.**SCI will perform Wafer sort test services and will provideaccess to LSI test engineers to the test equipment for the rate per hour of test equipment time forsuch services set forth in Attachment B-3. If LSI requires additional test time that isnot reflected in the schedule agreed to by the Parties, then LSI (in cooperation with SCI) will setpriorities between delivery of Products and test time. If unscheduled test time required by LSIimpacts On-time Delivery then any impacted delivery dates will be reset so that SCI will not bepenalized for failing to deliver in accordance with the original delivery dates.     **5.4 In-Process Wafer Pricing**. Pricing for In-Process Wafer processing will be based on thetype of process and the degree of completion of the Wafer as of the Effective Date. The prices forthe various amounts of Wafer processing according to
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each process technology for the In-Process Wafers are set forth in Attachments B-1and B-2.     **5.5 Rapid Chip Product Pricing**. Pricing for manufacture and processing of RapidChip® Productswill be based on the type of process and the degree of processing of the Product that SCI willperform. The prices for the various amounts of Wafer processing according to each processtechnology for RapidChip® Products are set forth in Attachment B-1.     **5.6 Other Fees**          **(a)***Expedited Processing (Hot Lots and Super Hot Lots)*. LSI will pay SCI the fees set forthon Attachment B-3 for the corresponding expedited processing. To the extent LSI is chargedany amounts for expedited partial processing of Products, such amounts will be prorated over thenumber of processing moves that receive expedited treatment. Expedite fees shall not be chargedfor any such lot that is not delivered by the SCI committed expedited delivery date.          **(b)***Prototypes.*LSI will be charged the pricing premium set forth on Attachment B-3for any prototype products that LSI requests SCI to manufacture.          **(c)***Small Lots.*LSI has the right to place “Small Lot” Orders on average over the quarter for[*] of the production lots of Products with a maximum of [*] of production lots started in anygiven week. For anything above these percentages, LSI will pay a [*] premium over the standardprices paid to SCI for such Products.          **(d)**A “Small Lot” is a production lot having less than [*] Wafers.          **(e)***Reticles*. If LSI obtains any Reticles from SCI under this Agreement, any fees paid by LSIfor such Reticles will include all fees for engineering work related to preparation of the Reticlesand all costs of the initial mask preparation. LSI will own all such Reticles, but SCI will retaincustody of and the responsibility for safekeeping for such Reticles during the period they areavailable for use at the Gresham Facilities.          **(f)***Consumables.*LSI will provide to SCI all probe cards and load boards necessary for SCI tomanufacture the Products; provided that both Parties agree that all such probe cards and loadboards will remain LSI’s property and the probe cards and load boards for Products manufactured atthe Gresham Facilities as of the Effective Date are already located at the Gresham Facilities. LSIwill be responsible for maintenance and replacement costs for all probe cards used by SCI.Maintenance costs for probe cards will be billed to LSI at [*]. Any other consumables used by SCIin performance of its obligations under this Agreement will be the sole responsibility of SCI, andLSI will not owe SCI any separate amounts for such consumables. SCI will repair or replace anysuch items that are damaged, lost or otherwise rendered unusable due to any act or omission by SCIwhile they are in SCI’s custody or control.
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          **(g)***Engineering Maintenance Services.*Engineering time for engineering maintenance onRetained Equipment, if requested by LSI, will be charged per Attachment B-3.          **(h)***Transition Services.*Transition Services requested by LSI pursuant to Section 14.4 willbe provided by SCI at a [*]. LSI will also reimburse SCI for any reasonable out-of-pocket costsincurred by SCI in providing such Transition Services, subject to LSI’s prior approval of suchcosts.          **(i)***Invoicing and Payment Terms*. SCI will submit to LSI invoices for payment of applicableprices or fees for Products and Services after delivery of the applicable Products to LSI orcompletion of the applicable Services. LSI will pay all undisputed amounts set forth in eachproperly delivered invoice [*] from the date of the invoice. LSI will promptly provide to SCInotice of any disputed payments and the Parties will negotiate promptly and in good faith toresolve the issue. Payments will be made by wire transfer to the account specified inAttachment G. All payments will be made in U.S. dollars. Until LSI has received fullpayment of all amounts due under the Final Installment Payment, LSI shall have and at itsdiscretion may exercise a right to offset any and all amounts otherwise payable pursuant to thisAgreement against payment due to LSI pursuant to the Final Installment Payment at any time afterthe Final Installment Payment, in whole or in part, has become due but remains unpaid.     **5.7 Taxes**. The prices for the Products and Services are exclusive of sales tax, use tax,value added tax, or other similar tax or duty imposed by any government authority (collectively,“Taxes”). If any such Taxes are imposed in connection with the sale or transfer of Products to LSIor any of its Subsidiaries by SCI hereunder, LSI shall bear the cost of such Taxes provided thatthe amount of such Taxes is properly invoiced to LSI along with the price of the Products inquestion. The Parties will cooperate in the recovery of any such Taxes paid and in the reductionof Taxes payable. Without limiting the generality of the foregoing, if LSI provides SCI with avalid reseller’s tax exemption certificate for particular Products, SCI will not include any Taxesin its invoices for such Products. In no event will LSI be liable for any taxes based on SCI’s netincome or profits.     **5.8 Inventory**. If an Order specifies or LSI requests that SCI store completed or in-processProducts in inventory, SCI will keep such Products in an appropriately controlled environment forsuch Products. SCI shall not be required to provide any such storage in excess of the availablestorage capacity existing at the Effective Date. Such storage will be at no additional cost toLSI. SCI will retain risk of loss and title to all Products held in inventory by SCI, except asmay be otherwise expressly set forth in this Agreement. SCI will invoice LSI for in-processProducts held in inventory by SCI only after SCI completes manufacture of the Products and deliversthe Products to LSI. LSI will pay such invoices as provided in Section 5.7.     **5.9 Delivery.**SCI will arrange shipment of the Products to the LSI or the LSI customerfacility designated in the Order on the delivery date specified in the Order. All shipments by SCIwill be made F.O.B. the Gresham Facilities. SCI will follow LSI’s standard packaging, shipping,handling, and insurance procedures for shipment of the
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Products. Risk of loss and, except as otherwise provided in this Agreement, title to theProducts will pass to LSI (or its Subsidiary) upon delivery of the Products to the common carrierat the Gresham Facilities. LSI will have the right to cancel an Order to the extent of applicableProducts that are not shipped within the On-Time Delivery requirements; provided, however, in theevent that LSI’s cancellation is made pursuant to Section 11.2, the Wafer price amount(s)applicable to such cancelled Order quantity will be deemed to be Qualified Purchases. In addition,SCI will promptly reimburse LSI for any reasonable expedite charges, late charges, or similar costsor expenses incurred by LSI as a result of SCI’s failure to meet the On-Time Delivery requirementsfor any Product, up to a total amount of [*] per Wafer Lot.     **5.10 MRB**. SCI will manage the MRB process on lots that are placed on any type of factory holdfor a process or design related reason. LSI will cooperate with SCI for prompt resolution of thereason such lots were placed on hold. SCI will make commercially reasonable efforts to not allowthe distribution of number of MRB lots on sort hold and the average time to resolve them to exceedthe results achieved by LSI at the Gresham Facilities for the [*]. The distribution of MRB lotsachieved by LSI at the Gresham Facilities in the [*] shall be considered the “BaselineDistribution”. To the extent that SCI achieves or exceeds the Baseline Distribution, such MRB lotson sort hold will not be counted in the computation of the On-Time Delivery performance. If thedistribution of number of MRB lots on sort hold and the average time are greater than the BaselineDistribution, to the extent the distribution of the quantity of MRB lots on sort hold exceeds theBaseline Distribution, the cycle time that is outside of the Baseline Distribution for such MRBlots will be counted in the computation of the On-Time Delivery performance. Any lot that becomesan MRB lot on hold during Wafer processing (i.e. prior to sort) lot will be counted in the DPMLcalculation. Lots exempt in this calculation are any lots placed on hold by LSI, includingproducts that are waiting for reticles due to a design change. Notwithstanding the foregoing, anyWafer lot that (i) is in WIP and is an MRB lot as of the Effective Date or (ii) becomes an MRB lotafter the Effective Date due to processing that occurred prior to the Effective Date, will not becounted in the DPML calculation or distribution.**6.****Scrap Limits**     **6.1 Minimum Die Yield**. If the yield or defect density of the Wafers and/or any Wafer Lot forany Product are at or below the Minimum Die Yield (as defined in Attachment F) for suchProduct, LSI will have the right to reject the Wafers and/or the entire Wafer Lot, at no cost toLSI. The Minimum Die Yield for each Product will be initially calculated when [*] productionWafers for such Product have been manufactured at the Gresham Facilities (including Wafersmanufactured prior to the Effective Date) and will be recalculated every [*] thereafter using thedata from the just-ended [*] period; *provided however,*that no reduction in the Minimum Die Yieldfor a Product will be permitted. Attachment F sets forth the Minimum Die Yield for eachProduct for which [*] or more production Wafers have been manufactured at the Gresham Facilities asof the Effective Date.     **6.2 Rejection of Products**. If LSI or one of its Subsidiaries rejects any Products as providedin Section 6.1, SCI will promptly give LSI a full credit for the
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amounts paid by LSI for such rejected Products via a credit memo for such rejected Products,including the sort charge value for such rejected Products. If LSI’s expected payments to SCIwithin the [*] would not be fully offset by the credit, at LSI’s option, LSI will have the right torequire a cash refund equal to the unused amount of the credit.     **6.3 Disposal of Scrap**. SCI will properly dispose of all Wafers and Wafer Lots rejected by LSIand all other scrap in compliance with all applicable laws in order to prevent any unauthorizedsale and environmental hazards; *provided, however,*that SCI will give LSI access as requested byLSI to any scrap material for failure analysis or other engineering purposes.**7.****Cycle Time Requirements**     **7.1 Cycle Times**. SCI will record and report to LSI cycle times for manufacture and supply ofthe Products in industry-standard days per masking layer (“DPML”) by process technology. Promptlyafter the Effective Date, the Parties will establish cycle times for all process technologies byreferencing the cycle times for the applicable Products obtained at the Gresham Facilities duringthe [*] period ending on the Effective Date. (Attachment C sets forth an example of cycletimes.) SCI will measure DPML at the [*] percentile level and not as an average. If for anyProduct the DPML falls above the [*] percentile level for any measurement period or if during anymeasurement period there is reasonable evidence to indicate the DPML will be above the [*]percentile level when the relevant measurement for the period is made, SCI will promptly initiatesuch corrective actions, in coordination with LSI, as LSI reasonably deems appropriate.     **7.2 Expedited Production**. SCI will allocate to LSI up to [*] Hot Lots and [*] Super Hot Lotsin the Gresham Facilities running concurrently at any time. As each Hot Lot or Super Hot Lot, asthe case may be, is completed, the available allocated type of Lot will be available to LSI. [*]The subsequent negotiated amounts shall not fall below the Hot Lots or Super Hot Lot percentage oftotal production as reflected in the allocation for the first half of 2006. SCI will makecommercially reasonable efforts to accommodate any additional Hot Lots or Super Hot Lots requestedby LSI from time to time. LSI will have the right, in its discretion, to have SCI performexpedited processing for any or all of the process steps in the production of a Wafer Lot.     **7.3 Low Running Technologies.**Once volumes for any given technology (e.g., C9, C10, G11, G12or Gflx) falls below [*] Wafers per [*], the applicable cycle time requirement the Parties willmutually agree in good faith to a relaxed DPML.     **7.4 [*] Services.**For some period of time under this Agreement, [*] services required tocomplete the processing of the Products may be performed by [*]. The Parties agree that SCI willbe responsible for managing the day to day relationship with [*]. Provided SCI has properlyperformed such activities, SCI will not be responsible for any failure to meet its obligationsunder this Agreement to the extent resulting from the acts or omissions of [*] If an issue occurswith [*] performance, the Parties agree to discuss in good faith a resolution of the issue.
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**8.****Quality, Reporting, and Inspection**     **8.1 Quality**. Finished Products and Services supplied by SCI hereunder, including RapidChip®Products and In-Process Wafers to the extent processed by SCI, will meet the applicable procedural,quality and functional requirements and specifications (the “Specifications”) as set forth inAttachment H. At all times during this Agreement, SCI will perform in accordance with therequirements specified below.          **(a)**SCI will manufacture and provide Products to LSI according to the reliability,manufacture, and performance specifications (including monitoring requirements) of LSI.          **(b)**SCI will comply with the fab related portions of LSI’s corporate quality requirements andprocedures as documented by LSI in the following documentation: WG36-000001-00 (Gresham FactoryReliability Requirements Document) and QA00-000004-21 (General Spec for Supplier Quality andReliability Requirements Guidelines). These requirements and procedures are set forth inAttachment H.          **(c)**SCI will perform quality inspection on the Products, including Wafer acceptance testing(“WAT”), parametric testing, or E-Test, according to LSI’s specifications, which may includecustomer-specific enhancements and/or modifications to LSI’s standard specifications.          **(d)**SCI will maintain the level of quality in production and materials (including gas orchemical) necessary to, at a minimum, satisfy the defect densities and/or quality levels requiredby LSI or its customers.          **(e)**SCI will cooperate with LSI to continuously improve all quality metrics and resultsrelating to the supply of Products and Services as LSI and/or LSI’s customers may request.SCI will be solely responsible for all costs it incurs in meeting the specifications andrequirements in this Section 8.1. If SCI desires to make any changes to any of the foregoingrequirements or specifications or other changes to the manufacturing process, SCI will follow LSI’sEngineering Change Notification protocols. A copy of the Engineering Change Notification Protocolsare set forth in Attachment I.     **8.2 Documentation**. Within thirty (30) days after the Effective Date, in addition to theSpecifications, LSI will document the following processes and specifications:          **(a)**The specifications and special lead times for the ITAR flow, including the protocolsrequired for the ITAR flow and the Products that will follow the ITAR flow;          **(b)**The RapidChip® Product protocols, process flows, devices, and special specifications;
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          **(c)**The ARO process flows by customer, including the Products and special handlingrequirements for each customer; and          **(d)**The work remaining to do with the [*], the resources required, and the cost and thetimeline of the [*].     **8.3 Reporting.**SCI will maintain adequate records and adequate systems to generate allreports and track all data required by LSI. In addition, at a minimum, SCI will give LSI directsystems access to the following data relating to the Products ordered by LSI:          **(a)**process yield data (fab line yield);          **(b)**real time access to the work in process (“WIP”) (WIP status by stage, location,quantities, lot number part number and ship dates), substantially similar to what Gresham providesas of the Effective Date;          **(c)**statistical data (data result type from all tester types of sort, yield maps e-test dataand metrology data);          **(d)**process records (for Lots manufactured for LSI), including in-line inspection data,process travelers and any data, including traceability data, related to the process used formanufacture of LSI’s Products; and          **(e)**any and all data and reporting statistics required by LSI’s customers on LSI Products.LSI agrees to make all commercially reasonable efforts to work with its customers to limit thescope of such requests to those reasonably obtainable.The Parties agree that such direct systems access for LSI data will be replaced by “My Fab View”(including number of masking steps left for a particular lot to completion of Wafer processing) anddirect access for Product engineering information will continue to be provided through the YDSsystem.     **8.4 Testing by LSI**. When LSI receives Products to sort at a location other than the GreshamFacilities, LSI will test the Products according to the applicable Specifications. LSI willprovide SCI with LSI’s testing information derived from testing such Products, including the numberof good Die, the yield and the defect density for such Products. LSI will report such testinginformation to SCI [*] after conclusion of LSI’s testing. If LSI’s test results reveal defectsthat cause LSI to reject any Products, LSI and SCI will cooperate to determine the reason for thedefects and resolve the defects in any future Products. LSI has the right to place, access (bothdirectly and remotely), and use a subcontractor technical network server on the test floor of theGresham Facilities to transfer tester programs and data from testers from SCI’s systems to LSI’s orLSI’s designated subcontractor’s off-site locations. In connection with this server, LSI will havethe right to set up and maintain, at LSI’s expense, a communications link to LSI’s off-sitelocations from the test floor for uploading Wafer sort yield data on the Products that are testedat the Gresham Facilities.
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     **8.5 Process Change Control**. SCI will comply with LSI’s current procedures for changes to anytechnology or manufacturing processes under this Agreement. As of the Effective Date, such processchange control procedures are set forth in the following specifications: VB00-000356-00 (QRBOperations Spec for Supplier PCN and Change Control) and VB00-000075-00 (QRB Operating Procedure).SCI will notify LSI in writing in advance of all changes to technology or manufacturing processes.In the event LSI makes any changes to such procedures, LSI will provide SCI with reasonable priorwritten notice.     **8.6 Wafer Sort Test Program Revision Control**. SCI will use LSI’s Wafer sort programs,processes, and procedures for the Products and SCI will have no right to make any changes to suchWafer sort programs, processes, and procedures without the prior written consent of LSI. LSI willupdate such programs as and when necessary and will promptly provide all such updated programs toSCI. Prior to the commencement of any Wafer sort test services, SCI will verify that it is usingthe most recent version of the applicable test program. Changes that do not change the sort yieldor SPP (if applicable) or the test times, will not require approval from SCI. For all other testprogram changes, the Parties will define a control process for releasing changes to production.     **8.7 Audit and Inspection**. Upon reasonable prior written notice from LSI, SCI will allow LSI,its representatives, and/or LSI’s customers reasonable access during normal business hours to theGresham Facilities to audit and inspect the Gresham Facilities (including the equipment), toconfirm compliance by SCI with the terms of this Agreement, LSI’s quality requirements, and LSI’scustomer’s quality requirements. In addition, SCI will allow LSI and LSI’s customers reasonableaccess to the Gresham Facilities to address any performance issues. If LSI or its customer finds adeficiency with the Gresham Facilities or noncompliance with the terms of this Agreement, LSI willprovide written notice to SCI of the deficiency or noncompliance and SCI will cure such deficiencyor noncompliance within a reasonable period.     **8.8 On-Site LSI Staffing**. SCI will permit and facilitate the presence of up to [*] LSIemployees reasonably acceptable to SCI at the Gresham Facilities to monitor the performance of themanufacturing operations with respect to the Products and Services. Such LSI employees will begiven access to any portion of the Gresham Facilities, including the fab areas, as such LSIemployees deem appropriate; provided, however, such person(s) would be required to comply withSCI’s security, confidentiality and safety procedures. SCI will provide such security and safetyprocedures to LSI in writing promptly after the Effective Date and will communicate such proceduresto the applicable personnel as appropriate. Such persons are invited to attend, and allowed toparticipate in, as appropriate, SCI’s operations reviews and meetings when Product and Serviceissues are addressed. During the twelve (12) month period immediately following the EffectiveDate, SCI will provide adequate separate “visitor” office space and communications facilities forsuch LSI persons. Thereafter, the Parties will review the desirability for continuation of accessto such office space and communications facilities.**9.****Confidentiality**. Any disclosure of any confidential information of either Partypursuant to or in connection with this Agreement will be governed by the terms of the NondisclosureAgreement, as it may be amended from time to time (the “Master
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NDA”). LSI’s Confidential Information protected under the Master NDA includes the LicensedMaterial, Specifications, process technologies used to manufacture the Products, LSI’s quality andtesting requirements, all failure analysis information and all pricing information specified inthis Agreement.**10.****Ownership**     **10.1 License to Licensed Material**. Subject to the terms and conditions of this Agreement, LSIhereby grants to SCI, for the term of this Agreement as set forth in Section 14.1, a non-exclusive,royalty-free, non-sublicensable, non-transferable (except as part of an assignment of thisAgreement under Section 15.1), limited, revocable license, under all of LSI’s applicableProprietary Rights, to use the Licensed Material solely at the Gresham Facilities and solely asnecessary to manufacture the Products for LSI and its Subsidiaries and perform the Services for LSIand its Subsidiaries, in accordance with this Agreement. LSI retains all right, title, andinterest in and ownership of all Licensed Material and no other licenses or rights to any LicensedMaterial or any other Proprietary Rights of LSI, implied or otherwise, are granted to SCI underthis Agreement. SCI is solely responsible for all costs and damages to any Licensed Material thatoccur while such Licensed Material is in SCI’s possession or control. If at any time during thisAgreement LSI no longer has the right to license any of the Licensed Material to SCI, LSI willpromptly notify SCI and SCI’s license as to such Licensed Material will promptly cease. Thereafterthe Parties will promptly discuss and determine any adjustments that need to be made to thisAgreement, including each Party’s obligations hereunder, based on the removal of such item ofLicensed Material; provided, however, in no event shall SCI be required to thereby incur any newobligation (financial or otherwise) that is materially greater than SCI’s existing obligationshereunder. Promptly after the Effective Date, LSI will deliver to SCI all Licensed Material notalready located at the Gresham Facilities or otherwise in SCI’s possession.     **10.2 In-Process Wafers**. LSI retains all right, title, and interest in and ownership of allIn-Process Wafers. In-Process Wafers will be held by SCI on a consignment basis for completion ofthe applicable Wafer processing by SCI following the Effective Date. SCI will bear the risk ofloss of the In-Process Wafers as of the Effective Date until the In-Process Wafers are delivered toLSI as provided in Section 5.9 above.     **10.3 RapidChip Products**          **(a)***RapidChip Slices not manufactured by SCI.*LSI retains all right, title, and interest inand ownership of all RapidChip® Slices stored at the Gresham Facilities by SCI and all Productspartially processed by a third party and provided to SCI for Metallization Processing under thisAgreement. All such RapidChip® Slices and partially processed Products will be held by SCI on aconsignment basis for completion of the applicable Wafer processing by SCI. SCI will bear the riskof loss of all such RapidChip® Slices and partially processed Products until delivery of suchProducts to LSI as provided in Section 5.9 above.          **(b)***RapidChip Slices manufactured by SCI.*SCI will own
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RapidChip® Slices manufactured by SCI and held for future completion of the applicableprocessing by SCI. SCI will bear the risk of loss of all such RapidChip® Slices and partiallyprocessed Products until delivery of such Products to LSI as provided in Section 5.9 above.     **10.4 Reticles**. LSI has, will have, and will retain all right, title, and interest in allReticles. SCI will safeguard and maintain secure custody of the Reticles until LSI requests returnof the Reticles or delivery of the Reticles to a third party, at which time SCI will deliver theReticles at LSI’s cost and risk as instructed by LSI. While the Reticles are in SCI’s possessionor control, SCI will bear the risk of loss of the Reticles. While in SCI’s possession orcontrol, SCI will store the Reticles as specified below.          **(a)***Archived Reticles*. Archived Reticles are those which have not been used in the factoryfor twelve (12) months or longer. Archived Reticles are allowed to be stored in LSI’s currentoff-site Reticle storage facility at LSI’s cost and for a period of time which will be determinedby LSI.          **(b)***Inactive Reticles*. Inactive Reticles are those which have been used at any time duringthe previous twelve (12) months, are currently not being used, but are expected to be used duringthe following twelve (12) month period. SCI will store Inactive Reticles at the Gresham Facilitiesin an environment of no less than Class 1000 clean room airflow, with required temperature andhumidity ambient control.          **(c)***Active Reticles*. Active Reticles are those which are either currently in production, havebeen recently used for production, or are about to be used for production. SCI will keep ActiveReticles on the production floor so that they can be quickly and safely utilized for Waferprocessing.          **(d)***Adjustments.*At SCI’s request the foregoing time periods may be modified as is appropriateconsistent with the available Reticle storage at the Gresham Facilities. It will be SCI’sresponsibility to retrieve any Reticles stored as archived or inactive Reticles in a timely manner.**11.****Warranties**     **11.1 Absence of Defects**          **(a)***Products*. SCI warrants that the Products delivered to LSI or its Subsidiaries (or theirrespective customers) will be free from defects in material and workmanship and will comply withall applicable Specifications for a period of [*] from the date of delivery to LSI or itsSubsidiary (or LSI’s or its Subsidiary’s customer, if the Product is delivered directly to thecustomer). SCI’s warranty for In-Process Wafers and any Products partially processed by a thirdparty is limited to the actual work completed by SCI. If any Products do not conform to theSpecifications or contain defects in material and workmanship, SCI will, at LSI’s option, promptlyeither replace the defective Products or credit LSI for the price paid for such defective Products.If LSI’s expected payments to SCI within the next [*] would not be fully offset by the credit, LSIwill have the right to require a cash refund equal to the unused amount of the credit. The
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warranty in this Section 11.1(a) does not apply to any failure in conformance or defectresulting from damage to the Products that occurs after the risk of loss of such Products hastransferred to LSI nor to any failure in conformance or defect to the extent arising as a result ofLSI’s design nor for any other cause not attributable to defective materials or workmanship orfailure to meet Specifications on the part of SCI. This warranty extends to LSI’s Subsidiaries.SCI will not accept warranty claims directly from LSI’s customers or users of such customers’Products.          **(b)***Services*. SCI warrants that the Services will be performed in a professional and timelymanner, in conformance with all applicable processes and Specifications. If any of the Services donot comply with this warranty, upon request of LSI or its Subsidiaries, SCI will promptly reperformthe Services such that they do conform, at no additional cost or expense to LSI or itsSubsidiaries.     **11.2 Reliability Risk / Epidemic Failures**. In the event a defect in material or workmanshipor failure to meet Specifications is discovered in any Product, including any defect that is notidentified by the requisite Product test screens, sort or final testing, and such defect wouldindicate an unacceptable reliability risk to the performance or expected life of such Product, theParties will promptly cooperate by doing a failure analysis to ascertain the root cause for suchdefect. SCI will make all commercially reasonable efforts to implement appropriate manufacturingchanges to prevent the reoccurrence of any such defects. For the purposes of this Agreement,“Epidemic Failure” will be deemed to have occurred if more than [*] of any Wafer Lot, shipment, orOrder should fail in substantially the same manner. In the case of Epidemic Failure, SCI and LSIwill promptly cooperate to resolve the Epidemic Failure and implement the following procedure:          **(a)***Notice*. Within five (5) Business Days after learning of such Epidemic Failure or receiptof notice thereof from LSI, SCI will give LSI an initial written response indicating its plan fordiagnosing the problem.          **(b)***Solution*. SCI will exert all commercially reasonable efforts to diagnose the problem andplan a permanent solution and, if necessary, a work-around for temporary use until the solution isimplemented. If requested by SCI, LSI will provide reasonable technical assistance to SCI toassist in determining the cause and appropriate corrective actions for the Epidemic Failure. SCIwill promptly reimburse LSI for LSI’s reasonable costs associated with providing such assistance.SCI and LSI will mutually agree on a plan to resolve the Epidemic Failure.          **(c)***Effect on Products*. LSI and its Subsidiaries will have the option to refuse delivery ofaffected Products, cancel any outstanding Orders for the affected Product, and/or return for a cashrefund all defective Products and any Products that may be susceptible to the Epidemic Failure. Inaddition, to the extent the Products still exist as stand-alone components, LSI may return to SCIall defective Products and any Products that may be susceptible to the same failure. The amountsfor Products paid or that would have been paid by LSI (or a Subsidiary of LSI) pursuant to an Orderfor which delivery is refused or the Order is cancelled by LSI (or its Subsidiary) pursuant to thisSection 11.2 will be deemed to be Qualified Purchases. LSI will use commercially
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reasonable efforts to place other Orders for other Products to an equivalent purchase priceamount within the Revenue Commitment Period [*].          **(d)***Costs Relating to Epidemic Failure*. SCI will be responsible for all costs incurred inrectifying any Epidemic Failure including for any solutions, recovery plans, recalls, fieldreplacements, and engineering changes.     **11.3 Persistent Performance Problems**. If at any time LSI believes problems regarding yield,cycle time, defect density, or other performance metrics relating to the Products are persistent orare not being satisfactorily resolved by SCI, LSI will have the right to escalate such issues toSCI senior management for resolution and SCI will promptly cooperate with LSI to resolve suchissues.     **11.4 Disclaimer of Warranties**. THE EXPRESS WARRANTIES IN THIS SECTION 11 ARE IN LIEU OF ALLOTHER WARRANTIES, WHETHER EXPRESS, IMPLIED, OR STATUTORY, REGARDING THE SERVICES AND THE PRODUCTS,INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.**12.****Indemnification**     **12.1 By LSI**. LSI will indemnify and hold harmless SCI and its Subsidiaries from any and allthird party claims or suits brought against SCI or any of its Subsidiaries alleging that themanufacture of or sale to LSI or its Subsidiaries of Products, or the provision of Services to LSIor its Subsidiaries, by SCI or its Subsidiaries pursuant to this Agreement infringes ormisappropriates such third party’s Proprietary Rights, to the extent that such infringement ormisappropriation results from either (a) the compliance by SCI or its Subsidiaries with LSI’sspecifications as set forth in the Licensed Materials, or (b) the use by SCI or its Subsidiaries ofthe same equipment, materials, manufacturing methods, and process technologies as those used by LSIor its Subsidiaries at the Gresham Facilities immediately prior to the Closing (provided that, withrespect to any alleged infringement or misappropriation that occurs [*], SCI must be able toproduce pre-existing documentation clearly showing that the equipment, materials, manufacturingmethods, and process technologies in question are in fact the same as those used by LSI or itsSubsidiaries at the Gresham Facilities immediately prior to the Closing) (“LSI-Related Claims”).LSI will defend at its own expense any action or proceeding against SCI or its Subsidiaries basedon such LSI-Related Claims and will pay those costs and damages that are specifically attributableto such LSI-Related Claims that are finally awarded against SCI or its Subsidiaries or agreed to amonetary settlement of such action or proceeding. Notwithstanding the foregoing, LSI will have noobligation under this Section 12.1 or otherwise with respect to any infringement ormisappropriation claim based upon (i) a deviation by SCI or its Subsidiaries from any LSIspecification set forth in the Licensed Materials to the extent that such deviation results in thealleged infringement or misappropriation, or (ii) compliance with any LSI specification set forthin the Licensed Materials to the extent there was a non-infringing and commercially reasonable wayto implement such specification, after LSI shall have notified SCI in writing pursuant to Section15.6 of this Agreement of such non-infringing way and SCI had a reasonable opportunity to implementsuch specification. This Section 12.1 states
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LSI’s entire liability and SCI’s sole and exclusive remedy under this Agreement for anyinfringement or misappropriation claims relating to any Product or Service, any LSI specification,any Licensed Material, or any other information provided by LSI.     **12.2 By SCI**. SCI will indemnify and hold harmless LSI and its Subsidiaries from any and allthird party claims or suits brought against LSI or any of its Subsidiaries (a) alleging that themanufacture of or sale to LSI or its Subsidiaries of Products, or the provision of Services to LSIor its Subsidiaries, by SCI or its Subsidiaries pursuant to this Agreement infringes ormisappropriates a third party’s Proprietary Rights, to the extent that the alleged infringement ormisappropriation results from (i) a deviation by SCI or its Subsidiaries from any LSI specificationset forth in the Licensed Materials (ii) compliance with any LSI specification set forth in theLicensed Materials to the extent there was a non-infringing and commercially reasonable way toimplement such specification, after LSI shall have notified SCI in writing pursuant to Section 15.6of this Agreement of such non-infringing way and SCI had a reasonable opportunity to implement suchspecification., or (iii) the use by SCI or its Subsidiaries of equipment, materials, manufacturingmethods, or process technologies that are not the same as those used by LSI or its Subsidiaries atthe Gresham Facilities immediately prior to the Closing (except for changes made to any of theforegoing in this clause (iii) in compliance with Section 8.5 above, and, provided that, withrespect to any alleged infringement or misappropriation that occurs more than two years after theClosing Date, it will be presumed, unless SCI can produce pre-existing documentation, including byreference to documentation covered by Section 8.5 above, clearly showing otherwise, that theequipment, materials, manufacturing methods, or process technologies in question were not the sameas those used by LSI or its Subsidiaries at the Gresham Facilities immediately prior to theClosing), or (b) arising from or relating to any personal injury or death, or property damage, tothe extent arising from any actual or alleged defects in or malfunction of the Products due totheir manufacturing by SCI (collectively, the “SCI-Related Claims”). SCI will defend at its ownexpense any action or proceeding based on such SCI-Related claims and will pay those costs anddamages that are specifically attributable to such SCI-Related claims that are finally awardedagainst LSI or any of its Subsidiaries or agreed to in a monetary settlement of such action orproceeding.     **12.3 Procedures**. As soon as an indemnified Party receives notice or otherwise obtainsknowledge of any third-party claim that may give rise to any claim for indemnification hereunder,the indemnified Party will promptly provide the indemnifying Party with written notice describingthe third-party claim. The indemnifying Party will have the right, at its election and at its soleexpense, to assume the defense of the third-party claim with its own counsel. If the indemnifyingParty elects to assume the defense of the third-party claim, then the indemnifying Party’sobligations under Section 12.1 or 12.2 above (as applicable) are subject to the conditions that theindemnified Party (and its applicable Subsidiaries and, in the case of SCI, ON):          **(a)**give the indemnifying Party access to all information in the indemnified Party’s controlthat are reasonably relevant to the third-party claim (except in instances where providing suchaccess could destroy the attorney-client privilege with respect to such information);
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          **(b)**not admit any liability with respect to the third-party claim;          **(c)**allow the indemnifying Party to control the defense and settlement of the claim, and          **(d)**cooperate with the indemnifying Party, at the indemnifying Party’s reasonable request andexpense, in defending or settling the claim.The indemnifying Party will have the exclusive right to settle, compromise, or adjust theindemnified claim with the prior written consent of the indemnified Party (which consent will notbe unreasonably withheld). If the indemnifying Party elects not to assume control of the defenseof the third-party claim, then the indemnified Party will defend such third-party claim usingcounsel of its choice and may settle, compromise, or adjust such third-party claim on such terms asthe indemnified Party may consider appropriate without the prior written consent of theindemnifying Party. In the event that the indemnifying Party elects not to assume control of thedefense of the third party claim, then the indemnifying Party shall be responsible for all costsincurred and damages paid by the indemnified Party as a result of the third party claim. Theindemnifying Party will be relieved of its obligations under this Section 12 as a result of theindemnified Party’s failure to give such notice or provide such cooperation only if and to theextent that such failure prejudices the indemnifying Party’s ability to perform its obligationsabove.**13.****Limitations of Liability**. EXCEPT WITH RESPECT TO DAMAGES ARISING FROM A BREACH OFSECTION 9 (CONFIDENTIALITY) AND EXCEPT FOR EACH PARTY’S OBLIGATIONS UNDER SECTION 12(INDEMNIFICATION), IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY CONSEQUENTIAL, PUNITIVE,INDIRECT, EXEMPLARY, SPECIAL, OR INCIDENTAL DAMAGES, INCLUDING ANY LOST DATA AND LOST PROFITS,ARISING FROM OR RELATING TO THIS AGREEMENT REGARDLESS OF THE LEGAL THEORY UPON WHICH SUCH DAMAGESARE CLAIMED AND EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. EXCEPT FOR BREACHES OFSECTION 9 (CONFIDENTIALITY) AND EXCEPT FOR EACH PARTY’S OBLIGATIONS UNDER SECTION 12(INDEMNIFICATION), EACH PARTY’S TOTAL CUMULATIVE LIABILITY IN CONNECTION WITH THIS AGREEMENTAND THE PRODUCTS, WHETHER IN CONTRACT OR TORT OR OTHERWISE, WILL NOT EXCEED [*] DURING THE [*]PERIOD UNDER THIS AGREEMENT AND [*] UNDER THE [*] PERIOD UNDER THIS AGREEMENT (THE “CAP”). THEAPPLICABLE LIABILITY CAP FOR A PARTICULAR CLAIM OR CAUSE OF ACTION WILL BE DETERMINED BY THE PERIODWHEN THE FIRST PRODUCT(S) UPON WHICH THE CLAIM IS BASED WERE PRODUCED. AFTER THE FIRST [*] OF THE[*] EITHER PARTY MAY PROPOSE A DIFFERENT CAP BASED UPON THE EXPECTED PURCHASE AND SALES VOLUMES OFPRODUCTS AND SERVICES UNDER THIS AGREEMENT FROM THAT POINT ONWARD AND THE OTHER PARTY WILLNEGOTIATE TO AN APPROPRIATE ADJUSTMENT TO THE CAP FOR PROSPECTIVE PERIODS.
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**14.****Term and Termination**     **14.1 Term**. The Agreement will commence on the Effective Date and will continue thereafter fora period of six (6) years (“Initial Term”), unless terminated earlier as provided below. After theInitial Term unless terminated earlier as provided below, the Agreement will automatically renewfor successive periods of two (2) years unless either Party has provided written notice ofnon-renewal to the other Party at least six (6) months prior to the date of expiration of thethen-current term.     **14.2 Discontinuation of Low-Demand Technology**. After the [*] with respect to the GflxTMProcess Technology and LSI’s G12 and G11 process technologies, and after the first [*] with respectto any other LSI process technology, SCI then will have the right to notify LSI that SCI intends todiscontinue support of the Products for which demand has fallen below certain agreed upon minimumvolumes. If SCI, following [*] as stated above, elects to discontinue support for such Products,SCI will provide LSI with prior written notice of [*] and will cooperate with LSI as LSI mayrequest in implementing and fulfilling a last time buy process for LSI’s end of life requirementsfor such Products during such 24 month notice period.     **14.3 Termination**          **(a)***For Breach*. Each Party will have the right to terminate this Agreement by sending writtennotice of termination to the other Party if the other Party (i) materially breaches this Agreementother than as a result of a Force Majeure described in Section 15.9 below and does not cure thebreach within sixty (60) days after receiving written notice thereof from the non-breaching Party,or (b) ceases to conduct business or begins winding up its affairs, becomes the subject ofproceedings in bankruptcy, enters into an assignment for the benefit of its creditors, or appointsa receiver or trustee or has a receiver or trustee appointed for it.          **(b)***For Change of Control*. LSI will have the right to terminate this Agreement in the eventof a Change of Control of SCI or ON if LSI does not consent to such Change of Control (whichconsent will not be unreasonably withheld).     **14.4 Transition Services**. Upon expiration or termination of this Agreement for any reason,SCI will cooperate with LSI and at LSI’s request promptly assist LSI in the preparation andexecution of a plan to transition the supply of Products and Services to another provider. Afterthe expiration or termination of this Agreement while LSI is transitioning the supply of Productsand Services to another provider, SCI will continue to fulfill Orders submitted by LSI, as long asthe Gresham Facilities has capacity to fulfill the Orders. SCI will cooperate with LSI and thealternate provider of Products and Services during this transition and will provide information,technology, training, and intellectual property licenses to the alternate provider of the Productsand Services as reasonably requested by LSI.     **14.5 Effects of Termination**. Upon expiration or termination of this Agreement, except fortermination for LSI’s breach pursuant to Section 14.3(a) above, SCI will fulfill all Orders placedunder this Agreement prior to the effective date of
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termination pursuant to all performance requirements of this Agreement with regard to thesatisfactory manufacture, quality, reporting, inspection and delivery of Products and Services.Promptly upon expiration or termination of this Agreement, and except as provided below, alllicenses granted to SCI hereunder will immediately cease and SCI will promptly return to LSI allLicensed Material or certify in writing to LSI that the Licensed Materials have all been destroyed,except to the extent that SCI is permitted to retain and/or use any portion of the LicensedMaterials pursuant to another agreement with LSI. Notwithstanding the foregoing, SCI will have theright to continue to exercise the licenses granted in this Agreement and to use the LicensedMaterial after the termination or expiration of this Agreement solely for the time period duringwhich SCI continues to manufacture or provide Products or perform Services using such LicensedMaterial for LSI or any of its Subsidiaries. Sections 1, 9, 10, 11, 12, 13, 14.4, 14.5, 15 willsurvive expiration or termination of this Agreement for any reason.**15.****General Provisions**     **15.1 Assignment**. Neither Party may assign or transfer, by operation of law or otherwise, anyof its rights under this Agreement (including any licenses granted hereunder) or delegate any ofits duties under this Agreement to any third party without the other Party’s prior written consent.Any attempted assignment or transfer in violation of the foregoing will be void.          **(a)***Assignment by SCI*. Notwithstanding Section 15.1 above, upon the prior written consent ofLSI, which consent will not be unreasonably withheld, SCI will have the right to assign thisAgreement in connection with a Change of Control of SCI. If LSI does not consent to an assignmentof this Agreement in connection with a Change of Control of SCI and elects to terminate thisAgreement as provided in Section 14.3(b), SCI will (and will cause the acquiring party to) provideall reasonable support and assistance to LSI for the transition to LSI’s designated alternatesource of the supply of Products and Services provided to LSI under this Agreement.          **(b)***Assignment by LSI*. Notwithstanding Section 15.1 above, up on written notice to SCI, LSIwill have the right to assign this Agreement in connection with a Change of Control of LSI.     **15.2 Compliance with Laws**. Each Party will be required to comply with all applicable rulesand laws in the performance of its responsibilities under the Agreement including those relating toexport licenses and regulations, government permits and government authorizations.     **15.3 Resolution of Disputes**. With respect to any dispute that arises from or relates to thisAgreement, the Parties will first attempt to resolve the dispute cooperatively by escalatingresolution of the dispute within each Party. If the Parties are unable to resolve the disputecooperatively, then prior to either Party taking action in a court of law, the Parties will submitthe dispute to mandatory mediation with Judicial Arbitration and Mediation Services (JAMS). TheParties will mutually agree on the identity of the mediator who will resolve the dispute. If theParties are unable to agree on
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a mediator, a neutral mediator will be selected by JAMS. Nothing in this Section 15.3 willprevent either Party from seeking injunctive relief.     **15.4 Governing Law**. This Agreement will be construed in accordance with, and governed in allrespects by, the laws of the State of California (without giving effect to principles of conflictsof law).     **15.5 Venue and Jurisdiction**. If any legal proceeding or other legal action relating to thisAgreement is brought or otherwise initiated, the venue therefor will be in the State of California,which will be deemed to be a convenient forum. Each Party hereby expressly and irrevocablyconsents and submits to the jurisdiction of the state and federal courts in the State ofCalifornia.     **15.6 Notices**. Any notice or other communication required or permitted to be delivered toeither Party under this Agreement must be in writing and will be deemed properly delivered, givenand received when delivered (by hand, by registered mail, by courier or express delivery service,or by facsimile) to the address or facsimile telephone number set forth beneath the name of suchParty below (or to such other address or facsimile telephone number as such Party will havespecified in a written notice given to the other Party):if to SCI: