Exhibit 10.40


 


SUPPLY CONTRACT


 


Advanced Power
Technology intends to secure silicon wafers for the manufacture of power switch
devices. Siltronic Corporation manufactures silicon wafers and intends to
supply this material. Set forth is the “Silicon Supply Agreement” between
Advanced Power Technology (APT) located in Bend, OR and Siltronic Corporation
(SCO) located in Portland, OR.


 


1.0
Term of Agreement


 


1.1
Twelve (12) month agreement commencing on January 1, 2006 and expiring on December 31,
2006.


 


1.2
Renegotiating discussions will commence one month before contract expiration;
extension period to be agreed upon.


 


1.3
Cause for early termination of this agreement would be for non-performance by SCO
and/or APT, including but not limiting non-payment by APT.


 


2.0
Volume – [ * ].


 


3.0
Pricing


 


3.1
Pricing is set forth in attachment #1.


 


3.2
Where possible, SCO will “help” keep APT competitive in both price and
technology through cost reduction programs and technology improvements.


 


4.0
Payment and Freight Terms


 


4.1
Net [ * ] days from date of SCO invoice. Currency in US dollars.


 


4.2
F.O.B. Siltronic Corporation, Portland, OR, freight collect. Freight carrier as
specified by APT.


 


4.3
Freight costs for expedited shipments, if requested by APT, will be the responsibility
of APT. SCO will incur all expedited freight costs for late shipments caused by
SCO. Substrate Buffer Stock.


 










[ * ] =  CONFIDENTIAL TREATMENT REQUESTED


 





















 


5.0
Substrate Buffer Stock


 


5.1
For AMT reactor material:


 


5.1.1
SCO agrees to maintain a three week inventory equivalent to APT’s consumption
of one common substrate. This substrate inventory will be maintained in
Portland.


 


5.1.2
SCO agrees to replenish the Substrate Buffer Stock within four weeks.


 


5.2
For GIll reactor material:


 


5.2.1
SCO will not maintain a buffer stock. Material will be built and shipped on a
quarterly basis. Material ordered outside of the quarterly forecast will be
built on substrate as available. All GIll orders must be submitted at one time
to allow allotment of reactor resources.


 


6.0
Lead-time


 


6.1
For AMT reactor material:


 


6.1.1
   SCO will commit to a three-week
lead-time provided the forecast is not in- creased more than [ * ] in the same
lead-time period and that it is a current product. Lead-time for non-regular
material is 4-6 weeks after specification has been accepted.


 


6.1.2
APT agrees to give SCO a five week “rolling forecast”. The first and second
week will be firm, which means no cancellations, reductions, or push-outs are
allowed Clarification: The week the updated forecast is
submitted is considered week zero, and the schedules in this week are already
considered completed and in shipping or in transit. Open schedules during the
next two weeks, first and second week, are considered firm.


 


6.1.3
APT agrees to give SCO an additional eight week visibility beyond the five week
“rolling forecast” after planning meeting once a quarter.


 


6.1.4
Releases for weeks one through five will be by product and for weeks six
through thirteen, it will be by total only.


 










[ * ] =  CONFIDENTIAL TREATMENT REQUESTED


 


2





















 


6.2
For GIll material:


 


6.2.1
APT agrees to provide SCO with orders blocked in three month increments.


 


6.2.2
SCO will commit to a six-week leadtime.


 


6.2.3
APT agrees that any additional material requested beyond the three month block
order will either be at the higher rate as stated in attachment #1 or the
entire next quarter’s forecast can be requested (with a six-week leadtime).


 


6.3
Minimum order quantities for all schedules (including engineering orders) will
be in in- crements of [ * ] wafers or more.


 


7.0
Quality


 


7.1
SCO warrants that their products, at the time of delivery, are in compliance
with approved APT specifications as agreed by both parties.


 


8.0
Engineering Services


 


8.1
A determination of cost benefit, if any, and ownership will be agreed upon
prior to any new activities in the “Reduction of SCO Production Cost” project.


 


8.2
SCO agrees to support engineering work involved with new products and work to
meet the stringent specification requirements of those and current products.


 


9.0
Confidentiality


 


9.1
APT and SCO agree to maintain such information in confidence and to take the
necessary measures to prevent complete or partial disclosure to third parties.
Disclosure of any confidential information shall not be precluded if such
disclosure is in response to a valid request from the SEC.


 


10.0
Force Majeure


 


10.1
  Pertaining to Force Majeure, APT and/or
SCO shall promptly notify the other party and shall use its best efforts to
minimize the consequences. For the duration and to the extent of Force Majeure
the parties will be released from their obligations.


 










[ * ] =  CONFIDENTIAL TREATMENT REQUESTED


 


3





















 


11.0
Indemnification


 


11.1
  SCO’s obligation to payment of damages,
for whatever reason, shall be limited to
the invoice value of the wafers directly having caused those damages.


 


12.0
Sole Agreement


 


12.1
  This Supply Agreement including all attachments
referenced herein, shall be the complete agreement of both APT and SCO and shall
supersede all prior agreements and understanding, oral or written, between the
parties respecting the subject matter hereof. Any amendments to this Agreement
shall be implemented by written amendment signed by authorized representatives
of APT and SCO.


 


IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written, accepted and agreed:


 


	
  SILTRONlC
  CORPORATION

  	
  ADVANCED
  POWER TECHNOLOGY

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ DAVID ADELMAN

  	
   

  	
  By:

  	
  /s/ MARK GABLER

  	
   

  
	
   

  	
   

  
	
  Title:
  Sales Director

  	
  Title:
  Director of QA & Assembly/Test Ops

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date: 12/13/05

  	
  Date: 12/30/05

  
						



 










[ * ] =  CONFIDENTIAL TREATMENT REQUESTED


 


4





















 


Attachment #1


 


4 Inch


 


Pricing for AMT parts
and GIll parts (GIll parts ordered on a 3 month basis)


 


	
  Part

  	
   

  	
  220-1010

  	
   

  	
  220-1020

  	
   

  	
  220-1030

  	
   

  	
  220-1040

  	
   

  	
  220-1050

  220-1051

  	
   

  	
  220-1060

  220-1063

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1 ‘06 – 12 ‘06

  Price

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  



 


	
  Part

  	
   

  	
  220-1080

  	
   

  	
  220-1100

  1000V

  	
   

  	
  220-1106

  1000V

  	
   

  	
  220-1120

  1200V

  	
   

  	
  220-1126

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1 ‘06 – 12 ‘06

  Price

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  



 


Pricing
for GIll parts not ordered on Quarterly basis


 


	
  Part

  	
   

  	
  220-1100

  1000V

  	
   

  	
  220-1106

  1000V

  	
   

  	
  220-1120

  1200V

  	
   

  	
  220-1126

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1 ‘06 – 12 ‘06

  Price

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  



 










[ * ] =  CONFIDENTIAL TREATMENT REQUESTED


 


5





















 


6 lnch


 


	
  Part

  	
   

  	
  220-1053

  500 V Mosfet

  	
   

  	
  220-1069

  600 V Mosfet

  	
   

  	
  220-1082

  800 V Mosfet

  	
   

  	
  220-1111

  1000 V Mosfet

  	
   

  	
  220-1122

  1200 V Mosfet

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1 ‘06 – 12 ‘06

  Price

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  



 


	
  Part

  	
   

  	
  220-1068

  600 V IGBT

  	
   

  	
  220-1094

  900 V IGBT

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1 ‘06 – 12 ‘06

  Price

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  



 


Notes: Parts listed have
been ordered since 01/01/05. All other parts not listed receive a [ * ] price
increase based on the last reorder schedule.


 


New/ENG orders to be
quoted. Minimum order quantity is [ * ] wafers or more.


 










[ * ] =  CONFIDENTIAL TREATMENT REQUESTED


 


6