Exhibit
10.7


 






CERTAIN INFORMATION (INDICATED BY “[***]”) IN THIS EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.


 


TOSHIBA


Toshiba America Electronic Components, Inc.


2950 Orchard Parkway, San Jose, CA 95131


 


Design and Production Agreement


 


Netlist Inc.


 


This
Design and Production Agreement (“DPA”) effective July 31, 2008 (the “Effective
Date”) is between Toshiba America Electronic Components, Inc., with a
principal place of business at 19900 MacArthur Boulevard, Suite 400, Irvine,
CA 92612 (“TAEC”) and Netlist Inc with a place of business at 51 Discovery, Suite 150, Irvine,
CA 92618 (“Customer”) and sets out the terms and conditions under which TAEC
will design the product identified herein for Customer.


 


1.                                      Project
Name


 


ID
ASIC


 


2.                                      Summary


 


This
DPA is for the development of ID ASIC for Customer.  The quote is based on TAEC’s initial die size
estimation.


 


3.                                      Design
Specification


 


[***]


 


4.                                      Schedule


 


MAJOR
PROJECT MILESTONES


 


	
  Event

  	
   

  	
  Target Date/Completed

  
	
  [***]

  	
   

  	
  [***]

  
	
  [***]

  	
   

  	
  [***]

  
	
  [***]

  	
   

  	
  [***]

  
	
  [***]

  	
   

  	
  [***]

  
	
  [***]

  	
   

  	
  [***]

  
	
  [***]

  	
   

  	
  [***]

  
	
  [***]

  	
   

  	
  [***]

  
	
  [***]

  	
   

  	
  [***]

  
	
  [***]

  	
   

  	
  [***]

  
	
  [***]

  	
   

  	
  [***]

  
	
  [***]

  	
   

  	
  [***]

  



 

















 


Production
turnaround time:     [***]
working weeks


 


Schedule
will be finalized in the SOW upon Design Decision. See Section 13.5.


 


5.                                      Technology


 


[***]


 


6.                                      Package
and Die Size Option


 


	
  Package

  	
   

  	
  Ball Pitch

  	
   

  	
  Body Size

  	
   

  	
  Substrate Layers

  	
   

  	
  Die Size

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  



 


7.                                      Internal/External
IP


 


Internal
IP:


[***]


 


External
IP:


[***]


 


8.                                      Price


 


	
  First

  	
   

  	
  [***] pieces: US$[***]

  
	
  Next

  	
   

  	
  [***] pieces: US$[***]

  
	
  Next

  	
   

  	
  [***] pieces: US$[***]

  
	
  After
  first

  	
   

  	
  [***] pieces: US$[***]

  



 


Changes
in die size will affect the price quoted.


 


Prices
do not include and are subject to any applicable sales tax.


 


9.                                      Non-Recurring
Engineering Charges (“NRE”)


 


9.1                                 Total NRE Charges (not
including re-spin charges as set out in Section 9.2): US$[***]


 


9.2                                 Additional NRE Charges in
the event of Re-spin


 


	
  Metal
  Layer Re-spin Charges:

  	
   

  	
  US$[***]

  
	
  All-Layer
  Re-spin Charges (base and metal layers):

  	
   

  	
  US$[***]

  



 


In
the event a re-spin involving only metal layers is required, TAEC will provide
a firm quote for additional re-spin NRE charges, which will be calculated on a
cost per layer basis including required engineering effort. In the event the
implementation of design 


 

















 


changes
affects all metal layers, including contact and vias, the additional NRE cost
will not exceed the Metal Layer Re-spin Charges amount stated above.


 


In
the event an all-layer re-spin is required, the All-Layer Re-spin Charges will
apply as stated above.


 


The
charges set forth in this Section 9.2 are based on the assumptions that (1) no
Material Changes would be needed and (2) no changes whatsoever to the
package design would be required, whether Material Changes or not. If either of
these assumptions is incorrect, costs may vary.


 


9.3                                 Internal IP
Defects/Bugs


 


Should
Internal IP be found to have a Defect/Bug, as defined in the attached SLI Terms
and Conditions, TAEC will be responsible for the additional NRE re-spin charges
required to repair such Defect/Bug, subject to Section 9.4,


 


9.4                                 Customer Design
Changes During Re-spin for Internal IP Defects/Bugs


 


If
Customer requests design changes during a re-spin to correct Internal IP
Defects/Bugs, a portion of the additional re-spin cost will be shared by
Customer.


 


For
a metal re-spin, this cost will be calculated on the basis of the number of
layers required for Customer changes and whether those layers are implicated by
the Internal IP repairs. If the Customer-requested design changes require the
same metal arid via layers as would be necessary for the Internal IP Defect/Bug
fix, the cost to Customer will not exceed 50% of the additional re-spin NRE
charges. If the Customer-requested changes require additional mask layer
changes, the NRE cost associated with the additional layers will be solely the
financial responsibility of Customer.


 


If
an all-layer re-spin is required in order to fix Internal IP Defects/Bugs, and
Customer requests additional design changes at that time, Customer will not he
charged more than 50% of the All-Layer Re-spin Charges.


 


10.                               NRE
Payment Schedule


 


[***]:                US$[***]


[***]:                US$[***]


[***]:                US$[***]


 


·                  [***] Prototypes are included in
NRE.


 


·                  A prototype lot charge of $[***] is included in the [***] payment.
Prototype lot charge is subject to any applicable sales tax.


 

















 


11.                               NRE
Services included


 


Engineering
activities


[***]


 


Manufacturing
activities


[***]*


 






*Any
additional qualifications requested by Customer beyond the standard Toshiba
qualification are not covered by the Total NRE Charges and may incur additional
fees.


 


12.                               Extra
Engineering Samples


 


[***] pieces:                                                                                                                      [***] unit price of
US$[***]


[***] pieces:                                                                                                                      [***] unit price of
US$[***]


[***] pieces:                                                                                                                      [***] unit price of
US$[***]


 


All
extra engineering samples are sold as Prototypes and are subject to, without
limitation, Articles 18.2 and 19.1 of the Terms and Conditions.


 


13.                               Project
Specific Conditions


 


13.1                           Final package selection to
be based on [***].[***] analysis
may lead to changes in [***] or [***]. Details of the [***] and [***] analysis and the [***] need to
be defined and mutually agreed in the Statement of Work (“SOW”).


 


13.2                           Details on the [***] and associated [***] to be
finalized in the SOW prior to [***]


 


13.3                           Customer may order a
commercially reasonable number of [***] pieces,
as determined by [***]in its sole discretion. [***] goods are subject to, without limitation, Articles
18.2 and 19.2 of the attached Design and Production Agreement Terms and
Conditions (“Terms and Conditions”). In the event that Customer wishes to order
any [***] pieces, such order shall be
placed no later than the date of [***].


 


13.4                           For the avoidance of doubt,
the Specifications as agreed upon by the parties and incorporated into the SOW
shall be based upon the defined load models provided by Customer.


 


13.5                           Upon [***],
TAEC will discuss the results of its tests assuring a path delay of [***] for the [***] provided
by Customer (“[***]”). On or before [***], Customer agrees to inform TAEC whether Customer
intends to proceed with the ID design (“Design Decision”). If Customer chooses
to proceed with the design, Customer agrees to accept [***],
provide a waiver, or alter its specifications to accommodate such results, and
TAEC will [***] 


 

















 


according
to Section 10 of this Agreement. If Customer chooses to cancel the design
upon completion of the [***], Customer
may terminate this Agreement [***] and [***].


 


14.                               General
Conditions


 


14.1                           Pricing stated in this DPA
is based on Toshiba America Electronic Components Inc. selling production parts
directly to Customer.


 


14.2                           Full specifications and
responsibilities to be defined and agreed in a SOW. Customer and TAEC will work
in good faith to finalize and sign the SOW within thirty (30) days of design
initiation.


 


14.3                           Schedule is provisional.
Final schedule is still to be agreed.


 


14.4                           TAEC reserves the right to
make extra charges up to [***]% of the
total NRE if Customer submits [***] Engineering
Change Orders (ECOs) or changes to the layout constraints file(s) after
the acceptance of final netlist, unless these ECOs/changes are attributed to
problems of TAEC implementing the design.


 


14.5                           TAEC may, in its sole
discretion, share a copy of this DPA, and any applicable SOW with Toshiba
Corporation Semiconductor Company and other Toshiba affiliates, on a
need-to-know basis in order to implement or further Customer’s project.


 


14.6                           TAEC may, upon written
notice to Customer, share Customer’s information as it pertains to their design
kit, library and user documentation with a supplier of EDA Tools for the sole
purpose of resolving any debugging issues that may arise during the term of
this Agreement.


 


14.7                           This DPA shall be governed
by the attached Terms and Conditions, which are incorporated herein by
reference.


 


14.9                           In the event of any conflict
between the provisions set forth in this DPA and the Terms and Conditions to
which it is attached, the contents of the DPA shall control.


 


14.10                     This Agreement (as defined
in the Terms and Conditions) is the entire agreement between the parties and
supersedes any prior communications, representations, or agreements as to the
subject matter hereof, whether written or oral.


 


14.11                     Any changes to the DPA and/or
the Terms and Conditions after the execution of the DPA must be mutually agreed
upon in the form of a written amendment signed by both parties.


 

















 


	
  Toshiba
  America Electronic Components, Inc.

  	
   

  	
  NetList
  Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/
  Takeshi Iwamoto

  	
   

  	
  /s/
  James P. Perrott

  
	
  Signature

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  James
  Perrott, SVP Sales & Marketing

  
	
  Takeshi
  Iwamoto VP, Customer SoC & Foundry Business Unit, Systems LSI

  	
   

  	
  Printed
  Name and Title

  
	
  Printed
  Name and Title

  	
   

  	
   

  
	
   

  	
   

  	
  8/15/08

  
	
  8/22/08

  	
   

  	
  Date

  
	
  Date

  	
   

  	
   

  



 

















 


Toshiba America Electronic
Components, Inc.


Design and Production
Agreement Terms and Conditions


 


These
Terms and Conditions set out the terms and conditions under which TAEC will de
these terms are attached.


 


1.                                      DEFINITIONS


 


1.1                                 “Agreement” shall refer to
the agreement comprising the DPA (as hereinafter defined), the Terms and
Conditions, the SOW, and any other addenda specifically noted therein (all as
defined herein).


 


1.2                                 “CEM “ means a contract
manufacturer engaged by Customer to purchase Product(s) from TAEC, which
are then assembled into products sold to Customer.


 


1.3                                 “Customer” means the
customer identified on Page 1 of the DPA.


 


1.4                                 “Defect/Bug” means a failure
of any intellectual property to meet the mutually agreed upon chip level and
system level specifications as provided at the time of development. Such
failure or nonconformance includes, but is not limited to, the inability of the
logic or interface portion of either Internal and External IP to meet mutually
agreed upon chip level and system level specifications.


 


1.5                                 “Design Initiation” means
Customer has placed and TAEC has accepted a Development PO to proceed with
Customer’s design.


 


1.6                                 “Development PO “ is the
purchase order created by the Customer to signify they have accepted the
Specifications and have agreed to proceed with the development of Customer’s
design.


 


1.7                                 “DPA” means the Design And
Production Agreement to which these terms and conditions are attached.


 


1.8                                 “Effective Date” shall mean
the date reflected on the first page of the DPA, its date of execution
notwithstanding.


 


1.9                                 “External IP” shall mean
intellectual property acquired from a third party IP provider by TAEC or
Customer for use in Customer’s design, which is so identified in the SOW and/or
in the DPA.


 


1.10                           “Internal IP “ means
intellectual property owned and/or provided by TAEC for use in Customer’s
design, which is so identified in the SOW and/or in the DPA.


 


1.11                           “Mask Work” means a series
of related images, however fixed or encoded; having or representing the
predetermined, three dimensional pattern of metallic, insulating or
semiconductor material present or removed from the layers of a semiconductor
chip product; and in which series the relation of the images to one another is
that each image represents a pattern of the surface of one form of the
resulting semiconductor chip product.


 

















 


1.12                           “Material Changes” means any
changes in Customer-provided specification or netlist that (1) lead to an
increase in block size or die size of 1% or more; (2) increase the nominal
performance of the block or chip or both by 1 % or more; (3) alter the
testing requirements after the Second Signoff; (4) in the case of I/O
limited designs, lead to any increase in pin out; or (5) in the case of
non-I/O limited designs, lead to an increase in pin out of 1 % or more.


 


1.13                           “NRE “ means the
non-recurring engineering fees charged for specific phases of work as set forth
in the DPA.


 


1.14                           “Product” means the
resulting product based on the design specified in the DPA and shall be defined
by mutually agreed upon specifications embodied in the documents contained
within the Customer Part Number File and TAEC published Quality and
Reliability Standards


 


1.15                           “Prototype” means
pre-production engineering samples of Products, which have been manufactured
before the completion of the Prototype Approval Signoff by both parties.
Prototypes are provided for evaluation purposes only. Prototypes may also be
called “Engineering Samples” or “KS,” “ES, “ or “HS “ for invoicing or other
purposes, but other types of reference to a Prototype shall not change the
status as the Prototype.


 


1.16                           “Prototype Approval Signoff”
shall mean the form signed by the Customer when the Prototype meets the
required Specification and the design is suitable for transfer in to
production.


 


1.17                           “Risk Production” means TAEC’s
commencing production of goods before the completion of the Prototype Approval
Signoff by both parties.


 


1.18                           “Second Signoff” means the
form signed by both parties indicating the design is ready for Tape-out.


 


1.19                           “SOW “ means the Statement
of Work attached to the DPA, or which is executed separately by the parties if
not attached thereto. The parties expressly agree that the SOW may be modified
from time to time on their mutual agreement, and that the project schedule and
other records of the TAEC Program Manager shall be the record of the parties’
modifications to the SOW.


 


1.20                           “Specifications” means the
specifications agreed by the parties for the Product and Prototype, as
applicable and incorporated into the SOW.


 


1.21                           “System Level Verification “
shall mean the performance of the External IP on the silicon in varying
Customer application systems as stated on the third party IP provider
specification.


 


1.22                           “TAEC “ means Toshiba
America Electronic Components, Inc.


 

















 


1.23                           “Tape-out” means TAEC has
released final database to Japan to begin the prototype fabrication (mask
making and wafer fabrication).


 


1.24                           “Terms and Conditions” means
these Design and Production Agreement Terms and Conditions.


 


2.                                      DEVELOPMENT
WORK


 


2.1                                 Details of the development
are set forth in the SOW. Design requirements may be changed by mutual written
agreement of the Parties; however, Customer understands and agrees that such
changes may result in additional charges.


 


2.2                                 The development shall be
completed when Customer notifies TAEC that the Prototype received by Customer
meets the Specifications, when Customer executes the Prototype Approval
Signoff.


 


2.3                                 If the Prototypes do not
conform to the agreed specification and TAEC agrees that the nonconformance is
due to TAEC’s error, TAEC will make all commercially-reasonable efforts to
expedite delivery of conforming Prototypes.


 


2.4                                 If Customer requests any
modifications to the Specifications, TAEC agrees to complete the modification
as soon as is reasonably practicable after TAEC has agreed to the modification.
For the avoidance of doubt, the parties expressly agree that TAEC shall have no
obligation to commence a modification unless and until the parties have agreed
on adjustments in schedule, costs, or other applicable provisions.


 


2.5                                 If TAEC assembles and
manufactures any goods at Customer’s request before Customer has issued its
written approval via Prototype Approval Signoff, Customer understands and
agrees that they will be done on a Risk Production order basis, with Customer
responsible for all assembly and production costs.


 


2.6                                 Products will be tested to
the developed test program resulting from the simulation database. Changes to
the test program after sample or production initiation may result in production
lead-time delays.


 


2.7                                 Each delivery of Products
shall be initiated by Customer’s written or electronic notification that a
Purchase Order (“Purchase Order”) will be forthcoming. Customer shall send a
written Purchase Order to TAEC within five (5) working days of the verbal
notice. Each Purchase Order shall identify the Products ordered; indicate the
requested quantity and a mutually agreed upon price; and specify the requested
delivery date.


 


2.8                                 Design initiation shall
commence when Customer issues a Purchase Order for the NRE charge. The Purchase
Order shall refer to the applicable DPA, and shall include the words: “This
Purchase Order represents acceptance of the terms and conditions in the Design
And Production Agreement between the issuer and Toshiba America Electronic
Components, Inc.”


 

















 


2.9                                 TAEC shall supply Products
to Customer based on production Purchase Orders that support a six (6) month
rolling forecast.


 


3.                                      DEVELOPMENT
TERM


 


[***]


 


4.                                      COMPENSATION


 


4.1                                 [***]


 


4.2                                 [***]


 


4.3                                 [***]


 


5.                                      RE-SPIN
NRE CHARGES


 


Re-spin
NRE charges will be based on engineering and manufacturing services as well as
on the extent of the modification, which may be done as either a metallization
or a diffusion change. Metallization changes may be implemented by regenerating
the metal and via masks only. Diffusion modifications, on the other hand,
require the regeneration of all masks. The extent of the engineering and
manufacturing services required for re-design shall be considered in
determining total charges for a re-spin of the design which shall be specified
in the DPA or an Amendment thereto.


 


6.                                      ACKNOWLEDGMENT


 


6.1                                 TAEC shall process Customer’s
Purchase Orders submitted in accordance with Article 2.7 within ten (10) working
days of TAEC’s receipt thereof. Purchase Orders shall only be binding as of the
date of TAEC’s acknowledgment and acceptance thereof.


 


6.2                                 TAEC shall only accept
Purchase Orders with requested delivery dates no more than six (6) months
from the Purchase Order date. Any requests for a shipment beyond that six-month
period shall be reviewed and acknowledged only after the requested delivery
date moves within the six (6) month period.


 


7.                                      PRODUCT
LEADTIME


 


7.1                                 Prototypes: TAEC will use
all commercially reasonable efforts to provide Prototypes within the total
turnaround time defined in the appropriate DPA and expressed as working weeks
from Tape-out.


 


7.2                                 Production: TAEC will use
all commercially reasonable efforts to provide production lead-time as defined
in the appropriate DPA or other document issued by TAEC, from the date of TAEC’s
acknowledgment and acceptance of a Purchase Order.


 

















 


8.                                      SHIPMENT
AND DELIVERY


 


8.1                                 Shipments shall be F.C.A.
shipping point. Risk of loss or damage shall pass from TAEC to Customer upon
delivery of the Products to the common carrier for shipment to Customer; title
to all Products released hereunder shall pass to Customer upon full payment by
Customer therefor.


 


8.2                                 Unless otherwise specified
by Customer, TAEC shall ship Products according to TAEC’s standard method.
Freight and insurance will be prepaid by TAEC and invoiced to Customer.


 


8.3                                 TAEC shall not be liable for
any damages or penalties for delay in delivery, or for failure to give notice
of delay when such delay is due to an act of Customer or any cause beyond the
reasonable control of TAEC, including, but not limited to, the causes specified
in Article 28. FORCE MAJEURE clause herein. For any delay excusable under Article 28,
the delivery date shall be deemed extended for the duration of the force
majeure event.


 


9.                                      PAYMENT
TERMS


 


9.1                                 Customer shall pay to TAEC
all amounts due hereunder within thirty (30) days of the date of TAEC’s invoice
therefor.


 


9.2                                 Customer may have a third
party distributor or other entity (each, a “Designated Payor”) pay the NRE charges
on Customer’s behalf subject to the following conditions:


 


a.                                       Customer will
so inform TAEC and will give TAEC instructions on to whom and where the NRE
invoice(s) should be sent;


 


b.                                      Upon TAEC’s
request, Customer will provide reasonable evidence to TAEC of such Designated
Payor s agreement to pay the NRE charges;


 


c.                                       Customer
remains primarily liable for the payment of the NRE charges, and understands
and agrees that it shall be fully responsible therefor if the Designated Payor
fails to pay such charges within thirty (30) days of the date of TAEC’s
invoice; and


 


d.                                      The payment of
the NRE charges by a Designated Payor shall not affect any of the rights and
obligations of the parties hereunder, and such Designated Payor shall not be
deemed a third party beneficiary of this Agreement, nor shall the Designated
Payor have any rights in or to Products, Prototypes, Mask Works, or any other
item relating to the subject matter hereof or any right to place or enforce a
lien against TAEC relating to the subject matter of this Agreement, and
Customer shall indemnify and hold harmless TAEC from any damages or claims TAEC
may suffer as a result of Customer’s engagement of a Designated Payor.


 
















 


9.3                                 TAEC may withhold or suspend
shipment or other performance hereunder, in whole or in part, if Customer or
its Designated Payor, as applicable, fails to make any payment in accordance
with Article 9.1, or otherwise fails to perform its obligations under
these Terms and Conditions.


 


9.4                                 TAEC reserves the right to
monitor Customer’s or the Designated Payor’s creditworthiness periodically
during the course of the work. If, in TAEC’s reasonable opinion, Customer’s or
the Designated Payor’s, creditworthiness declines, TAEC shall so notify
Customer or the Designated Payor, and as a condition to the performance of any
obligation under this Agreement, TAEC reserves the right in its sole discretion
to require Customer or the Designated Payor to provide security for payment of
any amounts due under this Agreement, including, but not limited to, opening an
irrevocable letter of credit to support Customer’s payment obligations
hereunder, or such other means as TAEC may determine appropriate.


 


10.                               CANCELLATION/DELAY
OF DEVELOPMENT:


 


10.1                           In the event that Customer
unilaterally delays a design milestone for longer than [***]
weeks beyond the schedule specified in the SOW, TAEC reserves the right to
charge Customer up to a total of [***] of the
Total NRE charge specified in the DPA.


 


10.2                           If Customer wishes to
discontinue the project after TAEC has accepted the Development PO from
Customer, the Customer or the Designated Payor shall be responsible to pay TAEC
for the NRE charges as set forth below (“Cancellation Fee”), unless otherwise
agreed in writing between TAEC and the Customer:


 


	
  Time

  	
   

  	
  Cancellation Fee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]% of NRE

  	
   

  
	
  [***]

  	
   

  	
  [***]% of NRE

  	
   

  
	
  [***]

  	
   

  	
  [***]% of NRE

  	
   

  
	
  [***]

  	
   

  	
  [***]% of NRE

  	
   

  



 


10.3                           In the event that Customer
unilaterally delays a design milestone for longer than [***] beyond
the schedule specified in the SOW, TAEC reserves the right to deem the design
cancelled and assess the Cancellation Fee specified in Section 10.2. In
such case, the Agreement will terminate upon payment of the Cancellation Fee.


 


10.4                           For the avoidance of doubt,
NRE already invoiced to Customer per the milestones and NRE payment schedule
set forth in the DPA (“Paid NRE”) shall offset the Cancellation Fee assessed in
Sections 10.2 and 10.3 above. To the extent that the Paid NRE exceeds the
Cancellation Fee as assessed, TAEC shall not charge an additional Cancellation
Fee; however, Paid NRE will not be refunded upon cancellation of the design.


 

















 


11.                               CANCELLATION/RESCHEDULE
OF PRODUCTION ORDERS


 


11.1                           Requests for cancellation must
be made in writing, and the following terms shall apply unless otherwise agreed
in writing between TAEC and the Customer. Cancellation fees will be assessed
based on the length of time from the date a written notice is received by TAEC
to the first scheduled shipment date.


 


	
  Days from scheduled shipment

  	
   

  	
  Cancellation Fees

  	
   

  
	
  [***] days

  	
   

  	
  [***]

  	
   

  
	
  [***] days

  	
   

  	
  [***]

  	
   

  
	
  [***] days

  	
   

  	
  [***]

  	
   

  
	
  [***] days

  	
   

  	
  [***]

  	
   

  



 


11.2                           Re-schedule requests must be
made in writing [***] days before the original
delivery date. Any order may be re-scheduled only once. Requests to delay
shipments may not exceed [***] days from
the original committed delivery date. The re-scheduled order may not be
canceled or further modified, and Customer will be liable for full payment of
the selling price.


 


	
  Days before Shipment

  	
   

  	
  Terms

  	
   

  
	
  Within next [***] days

  	
   

  	
  [***]

  	
   

  
	
  Within [***] days

  	
   

  	
  [***]

  	
   

  
	
  Over [***] days

  	
   

  	
  [***]

  	
   

  



 


12.                               INTELLECTUAL
PROPERTY RIGHTS AND OWNERSHIP


 


12.1                           Customer retains all right,
title and interest in and to all proprietary rights, including without
limitation, patent, copyright, trade secrets, mask work rights, in and to:
(i) all designs and design features of the Products, and (ii) all
patterns, drawings, and other data concerning the Products’ design features
including, but not limited to, the Products’ database, and (iii) all Mask
Work produced by TAEC for the manufacturing of Products.


 


12.2                           Notwithstanding the above
provision, TAEC retains all right, title and interest in and to [***] and all [***], [***], and other [***] rights
therein, and any associated [***] and [***]. For the purposes of this Agreement, “[***]” shall mean [***],
including, but not limited to the process control monitor contained in the [***]. TAEC reserves the right to perform similar work for
its other customers.


 


12.3                           Both parties understand that
any and all Mask Works produced by TAEC for the manufacturing of the Products
contain both parties’ Confidential Information (as hereinafter defined), and
that such Mask Works shall not be used in any manner except as necessary for
the performance of this Agreement.


 


12.4                           The party who desires to
assert its Mask Work rights against any third party for infringement (the “Asserting
Party”) shall give prior written notice to the other


 

















 


party
to allow such other party to decide whether or not to participate in such
dispute. If the other party decides not to participate, it shall provide all
commercially reasonable assistance to the Asserting Party in connection with
such dispute, at the Asserting Party’s expense.


 


12.5                           If an invention is made
solely by the employees of either party in connection with the development of
the Prototype or Products, all right, title, and interest in and to such items
shall belong solely to the party whose employees made such invention. If an
invention is jointly made by the employees of both Customer and TAEC, Customer
and TAEC shall jointly own all right, title, and interest thereto. Each party
shall be entitled to use and exploit such jointly owned invention and
intellectual property rights without notice or accounting to the other party.


 


13.                               MASK
WORKS REGISTRATION


 


13.1                           If Customer desires to
register the Mask Work for the Products under the Semiconductor Chip Protection
Act of 1984 (the “Act”), Customer shall make registration by itself; however,
Customer shall include TAEC’s name in such registration. Customer shall have
sole responsibility for obtaining registrations for the Mask Work. Upon
Customer’s request, TAEC agrees to supply Customer or its designee with any
reasonable identifying material required for deposit under the Act in order to
register a Mask Work in the names of Customer and TAEC. All expenses and charges
for registration and upkeep on Mask Work shall be borne by Customer.


 


13.2                           Customer shall use its best
efforts to comply with all semiconductor protection laws and applicable
regulations in connection with such application. If possible, Customer shall
expressly identify in the “nature of contribution” column of the U.S. mask work
registration form (and applicable columns of the application form of other
countries) that the portion of the Mask Work for the Products and any
intellectual property rights including Mask Work related thereto remain the
sole and exclusive property of TAEC.


 


13.3                           Customer shall furnish TAEC
with a copy of the application form of Mask Work for TAEC’s prior to filing,
and shall give TAEC reasonable time and opportunity to suggest changes and
edits.


 


14.                               MASK
WORK NOTICE


 


Upon
written request by Customer, and subject to packaging constraints, TAEC will
place a Mask Work notice on the outside package of the Product which shall
consist of the letter M in a circle and the names of Customer and TAEC.


 


15.                               BUSINESS
RELATIONSHIPS


 


15.1                           Except as may be
specifically provided in this Agreement, no right or license either expressed
or implied is granted to either party under any patent, patent application or
any other intellectual property right as a result of this Design


 

















 


Agreement.
The rights and obligations of the parties to these Terms and Conditions are
limited to those expressly set forth herein.


 


15.2                           This Design Agreement is not
intended to constitute or create a joint venture, partnership or formal
business entity of any kind. Customer and TAEC shall be independent contractors
and neither party shall act as the agent for or partner of the other party
without prior written agreement.


 


15.3                           Nothing in these terms and
conditions shall give either party the right to use the other’s name, trademark
or logo except where specifically authorized in writing by such other party.


 


15.4                           Customer understands and
agrees that a CEM’s purchases and other information relating to its business
relationship with TAEC are confidential information that TAEC may not disclose
without the CEM’s express permission (the “CEM Information”). Consequently, if
Customer requests TAEC to provide such CEM Information, TAEC shall do so only
if:


 


a.                                       Customer
provides to TAEC proof of the CEM’s permission; or


 


b.                                      Customer
defends, indemnifies, and holds TAEC harmless from and against any and all
claims and damages that TAEC may suffer as a result of such disclosure of CEM
Information.


 


16.                               SUBCONTRACTING


 


16.1                           TAEC may subcontract all or
part of the development of the Products to Toshiba Corporation or one or more
of TAEC’s affiliates or subcontractors, provided that each such subcontracting
party agrees in writing to comply with provisions of these terms and
conditions.


 


16.2                           Customer may subcontract all
or part of its obligations hereunder with respect to the Products to one of its
affiliates or subcontractors (each, a “Permitted Party”), provided that
(a) each such Permitted Party agrees in writing to comply with provisions
of these terms and conditions, (b) the Permitted Party is not a
semiconductor competitor to TAEC, and (c) Customer has given TAEC
permission to share information with such Permitted Party as may be required
for Permitted Party to carry out its duties.


 


17.                               CONFIDENTIAL
INFORMATION


 


17.1                           “Confidential Information”
as used in this Agreement will mean any and all technical and non-technical
information including patent, copyright, trade secret, and proprietary
information, techniques, models, inventions, know-how, processes, apparatus,
equipment, algorithms, software programs, and formulae related to the current,
future and proposed products and services of each of the parties and/or its
customers and/or vendors, including, without limitation, information concerning
product or process research and development, design


 

















 


details
and specifications, engineering, financial data, manufacturing, customer lists,
business forecasts, sales and merchandising, and marketing plans.


 


17.2                           The parties agree that
Confidential Information exchanged by them under this Agreement shall be
protected by the provisions of the Nondisclosure Agreement (“NDA”) signed
between them, and made effective as of                                        , mutatis mutandis.


 


17.3                           Notwithstanding the
expiration or termination of the NDA, the provisions of this Article 17
shall remain in effect for a period of ten (10) years from the date of
this Agreement.


 


18.                               WARRANTY


 


18.1                           Customer acknowledges and
agrees that the success of the development of the custom product contemplated
by this Agreement cannot be assured. TAEC gives no representation or warranty
that it will be successful in developing a design for such custom product or
that the development will progress according to the milestones set forth in the
Statement of Work. TAEC will under no circumstances be liable for any damages
arising from its failure to develop a design for such custom product or for
failing to meet the milestones set forth in the SOW. Any expenditures or
commitments by Customer in anticipation of TAEC’s success in developing such
custom product or meeting the milestones set forth in the SOW will be at
Customer’s sole risk and expense.


 


18.2                           PROTOTYPES/RISK
PRODUCTION-NO WARRANTY CUSTOMER ACKNOWLEDGES AND AGREES THAT ANY PROTOTYPE
AND/OR RISK PRODUCTION GOODS DELIVERED HEREUNDER ARE DELIVERED ON AN “AS IS “
BASIS WITH ALL FAULTS AND WITH NO WARRANTY OF ANY KIND, EITHER EXPRESS OR
IMPLIED.


 


18.3                           PRODUCT WARRANTY


 


a.                                       TAEC warrants
that:


 


i]                                         for a period of
one (1) year from the date of the delivery of each Product, the Product
shall: (a) conform to the Specifications; (b) be free from defects in
material or workmanship under normal use and service; and


 


ii]                                      at the time of delivery, the
Products will be free and clear of all liens, encumbrances, and other claims except
for TAEC’s reservation of a security interest in the Products prior to receipt
of payment in full therefor.


 


b.                                      TAEC’s
responsibility and the sole and exclusive remedy of Customer under this
warranty is, at TAEC’s option, to repair, replace, or credit Customer’s account
for any defective Products which are returned by Customer during the applicable
warranty period set forth above in sub-


 

















 


Article 18.3a.i],
provided that: (a) Customer promptly notifies TAEC in writing with a
detailed description of any alleged deficiencies upon discovery by Customer
that such Products fail to conform to the specifications; (b) such
Products are returned to TAEC, F.C.A. TAEC’s plant; and (c) TAEC’s
examination of such Products establishes to TAEC’s satisfaction that such
alleged deficiencies actually existed and were not caused by Customer’s misuse,
neglect, alteration, improper installation, repair, or improper testing of the
Product(s).


 


c.                                       TAEC SHALL
WARRANT EXTERNAL IP SOLELY TO THE EXTENT SET FORTH IN THE APPLICABLE SOW. IF
THE SOW IS SILENT ON WARRANTY, VERIFICATION, TESTING OR MAINTENANCE OF THE
EXTERNAL IP, CUSTOMER UNDERSTANDS AND AGREES THAT TAEC SHALL NOT WARRANT ANY
EXTERNAL IP, EXPRESSLY OR IMPLIEDLY, INCLUDING THE WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.


 


18.4                           FOR THE AVOIDANCE OF DOUBT,
THE PARTIES EXPRESSLY AGREE THAT THE WARRANTIES SET FORTH IN THIS
ARTICLE SHALL NOT APPLY TO (i) ANY EXTERNAL IP, AND
(ii) NON-CONFORMANCE CAUSED BY (A) IMPROPER USE, INSTALLATION,
MISUSE, NEGLECT, MODIFICATION, ALTERATION, REPAIR, OR IMPROPER TESTING OF THE
PROTOTYPES OR PRODUCTS BY CUSTOMER OR ANY PARTY; (B) THE PROTOTYPES OR
PRODUCTS HAVING BEEN SUBJECTED TO UNUSUAL PHYSICAL OR ELECTRICAL STRESS; OR
(C) INTERFERENCE FROM APPLICATIONS, SOFTWARE, OR OTHER PRODUCTS PROVIDED
BY THIRD PARTIES.


 


18.5                           EXCEPT AS EXPRESSLY PROVIDED
IN THIS ARTICLE, TAEC DISCLAIMS AND CUSTOMER WAIVES ALL OTHER WARRANTIES OR
LIABILITIES OF TAEC, EXPRESS, IMPLIED, OR ARISING OUT OF COMMON LAW OR
COURSE OF DEALING, RELATING TO TAEC’s PERFORMANCE HEREUNDER, INCLUDING BUT
NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A
PARTICULAR PURPOSE. THIS WARRANTY IS FOR THE SOLE BENEFIT OF CUSTOMER AND NOT
FOR ANY THIRD PARTY.


 


19.                               PROTOTYPES/RISK
PRODUCTION


 


19.1                           Customer acknowledges that
any Prototype will be provided for evaluation purposes only and not for any
other purposes and shall not be offered to any of its customers, directly or
indirectly, for purposes other than evaluation. Customer shall defend, indemnify,
and hold TAEC and its affiliates harmless from and against all damages,
obligations, causes of action, suits, or injuries of any kind arising from or
in relation to Customer’s use or other disposition of the Products


 

















 


in
violation of this Agreement and/or Customer’s supply of the Prototype to any of
its customers.


 


19.2                           Customer acknowledges that
Risk Production goods are provided prior to Prototype Approval Signoff.
Customer agrees to defend, indemnify, and hold TAEC and its affiliates harmless
from and against all damages, obligations, causes of action, suits, or injuries
of any kind arising from or in relation to Customer’s supply of the Risk
Production goods to any of its customers.


 


20.                               PRODUCT
APPLICATION


 


20.1                           This design is intended for
general commercial applications such as but not limited to telecommunications,
information technology equipment, computer equipment, office equipment, test
and measurement instrumentation, or domestic appliances. The design is not
intended for use in, nor is it intended to be incorporated into the Product for
use in, nor will TAEC knowingly sell such items for use in equipment which
requires extraordinarily high quality or reliability, and/or in equipment which
may involve life threatening, life support, life sustaining, or life critical
applications, including, but not limited to such uses as atomic energy
controls, airplane or spaceship instrumentation, traffic signals, biomedical or
medical instrumentation, combustion control, offensive weapon systems, or safety
devices.


 


20.2                           TAEC DOES NOT ACCEPT, AND
HEREBY DISCLAIMS, LIABILITY FOR ANY DAMAGES, WHICH MAY ARISE FROM THE USE
OF TAEC PRODUCTS USED IN SUCH EQUIPMENT OR APPLICATION AS SET FORTH
HEREINABOVE. CUSTOMER SHALL DEFEND, INDEMNIFY, AND HOLD TAEC FREE AND
HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, LIABILITIES, PROCEEDINGS, COSTS,
LOSSES, DAMAGES, AND EXPENSES OF EVERY KIND AND NATURE WHATSOEVER ARISING OUT
OF OR IN CONNECTION WITH USE OF PRODUCTS IN ANY SUCH EQUIPMENT OR APPLICATION.


 


21.                               INSPECTION


 


Customer
shall inspect Products at its own expense in accordance with the inspection
standard agreed upon by the parties. Unless Customer provides TAEC with written
notice of rejection within thirty (30) days after TAEC’s delivery of the
Products to the carrier, together with sufficient evidence of the cause
thereof, Products shall be deemed finally and irrevocably accepted. If TAEC
receives notice of rejection within that thirty (30) days, then TAEC shall, at
its option, repair or replace the defective Products or credit Customer’s
account, if TAEC has breached its warranty under Article 18.


 


22.                               ISSUANCE
OF RETURN MATERIAL AUTHORIZATION NUMBER


 


22.1                           All Products which Customer
returns to TAEC must be accompanied by a Return Material Authorization (RMA)
number. Unless further verification is required by TAEC, TAEC shall provide
Customer with an RMA number within three (3)


 

















 


working
days of Customer’s request for return of the nonconforming Product to TAEC.


 


22.2                           If it is determined that the
failure is electrical, mechanical, or of any other nature requiring further
verification by TAEC, Customer shall return to TAEC an agreed upon number of
data-logged samples of the Product lot, whereupon TAEC shall issue a Failure
Analysis (FA) number. Customer may, at its option, suspend the processing of
invoices through Customer’s accounting system for such nonconforming Product,
pending resolution of the investigation. TAEC shall analyze the samples and
report its findings to Customer within thirty (30) days after receipt of the
samples and shall advise Customer of a schedule to complete the failure
analysis and take corrective action.


 


22.3                           An RMA shall be issued
within three (3) working days following verification of the failure, if,
after testing, the sample has been found to be nonconforming. Upon mutual
agreement, TAEC shall replace, repair, or credit the purchase price of any
Product which has been found to be nonconforming. If the returned Product is
subsequently determined by Customer and TAEC to be in conformance, Customer
shall immediately complete payment.


 


22.4                           Transportation charges for
Products returned from Customer to TAEC or from TAEC to Customer under this
Article shall be at TAEC’s expense, provided that Customer shall reimburse
TAEC for any transportation charges paid by TAEC for returned Products which
are subsequently found to be conforming.


 


23.                               MATERIAL
AVAILABILITY


 


23.1                           TAEC shall give Customer
reasonable advance notice of its intent to discontinue the manufacture of those
Products included in this Agreement. Such notice shall be no less than twelve
(12) months in advance of the last order date. Customer shall have a twelve
(12) month order placement period and must take receipt of the Products within
eighteen (18) months of notification of the discontinuance.


 


23.2                           After receipt of such notice
of discontinuance, Customer may determine its Life Time Buy (LTB) quantity
under the following conditions: (a) the quantity shall be by mutual
agreement and (b) the price shall be negotiated at the time TAEC gives
notice of the discontinuance.


 


24.                               LIABILITY


 


TAEC
WILL UNDER NO CIRCUMSTANCES BE LIABLE FOR INDIRECT, CONSEQUENTIAL,
SPECIAL, INCIDENTAL, SECONDARY, PUNITIVE OR EXEMPLARY LOSS OR DAMAGES OR
ECONOMIC LOSS ARISING OUT OF OR RELATING TO THE TRANSACTIONS CONTEMPLATED IN
THIS AGREEMENT FOR ANY REASON WHATSOEVER REGARDLESS OF THE FORM OF ACTION,
EVEN IF TAEC HAD BEEN ADVISED OF THE LIKELIHOOD OF SUCH LOSS OR DAMAGES
OCCURRING AND EVEN IF AN EXCLUSIVE REMEDY FAILS OF ITS ESSENTIAL PURPOSES. TAEC
SHALL NOT BE LIABLE FOR ANY DAMAGES


 
















 


OR
CLAIMS ARISING MORE THAN ONE (1) YEAR PRIOR TO THE INSTITUTION OF A LEGAL
PROCEEDING THEREON. IN NO EVENT WILL TAEC’s LIABILITY TO CUSTOMER FOR ANY
ACTION OR CLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT EXCEED THE
AMOUNT ACTUALLY PAID BY CUSTOMER TO TAEC FOR THE PROTOTYPES OR PRODUCTS THAT
ARE THE SUBJECT OF SUCH CLAIM.


 


25.          INTELLECTUAL PROPERTY RIGHTS
INDEMNIFICATION


 


25.1                           Subject to the provisions
set forth hereinafter and in Article 26. NON-INFRINGEMENT OF RIGHTS clause
herein, TAEC shall defend, indemnify, and hold Customer harmless from and
against all damages, obligations, causes of action, suits, or injuries of any
kind arising from any actual or claimed infringement of United States, Canada,
Mexico, Japan and European Community patents, mask work rights, or copyrights
with respect to TAEC’s design or TAEC’s manufacturing of the Prototypes or
Products; provided that:


 


a.                                       Customer shall
promptly notify TAEC in writing of any claim of infringement; and


 


b.                                      TAEC shall have
sole control of both the defense of any action on such claim and all
negotiations for its settlement or compromise; and


 


c.                                       Customer shall
provide all reasonably necessary authority, information, and assistance to TAEC
and its counsel for the defense of such claim.


 


25.2                           Notwithstanding the
foregoing, TAEC shall have no liability or obligation to Customer with respect
to any intellectual property results infringement or claims thereof based on:


 


a.                                       TAEC’s
compliance with designs, plans, specifications, or other information provided
by Customer;


 


b.                                      Use of the
Prototypes or Products in combination with devices or products not purchased
hereunder where the Products would not in themselves be infringing;


 


c.                                       Use of the
Prototypes or Products in an application or environment for which such Products
were not designed or contemplated;


 


d.                                      Modifications
or additions to Prototypes or Products by Customer;


 


e.                                       Any claims of
infringement of a patent in which Customer, or any affiliate or customer of
Customer, has an interest or a license; or


 


f.                                         Should the
owner of such intellectual property rights wish to grant a license to Customer
with respect to a claim of patent infringement when the claimant declines to
offer a license to TAEC but insists upon dealing


 

















 


only with Customer, notwithstanding TAEC’s good
faith efforts to resolve the claim.


 


25.3                           If any Product is held to
constitute an infringement or its use is enjoined, TAEC, at its option and at
its own expense, may:


 


a.                                       Procure for
Customer the right to continue using such Product royalty-free; or


 


b.                                      Replace such
Product to Customer’s reasonable satisfaction with non-infringing product of
equivalent quality and performance; or


 


c.                                       If (a) and/or
(b) above are impracticable, accept the return of such Product for credit,
allowing for a reasonable deduction for depreciation.


 


26.          NON-INFRINGEMENT OF RIGHTS


 


Customer
represents and warrants that the circuit design and other information furnished
by Customer to TAEC, with respect to the design portion of the Prototypes or
Products does not infringe any copyright, trade secret, United States, Canada,
Mexico, Japan and European Community patent or other intellectual property
right of any third party. Customer shall defend, indemnify and hold harmless
TAEC against any claims, damages, and expense (including attorney fees),
arising out of or in connection with Customer’s breach of the foregoing
representation and warranty.


 


27.          TERMINATION


 


27.1                           This Agreement will become
effective on the Effective Date and will remain in full force and effect for a
period of three (3) years from the Effective Date, unless terminated
pursuant to this Article 27.


 


27.2                           Either party may terminate
any development or Purchase Order, effective upon written notice to the other
party should any of the following events occur:


 


a.                                       The other party
files a voluntary petition in bankruptcy;


 


b.                                      The other party
is adjudicated bankrupt;


 


c.                                       The other party
makes an assignment for the benefit of its creditors;


 


d.                                      A court assumes
jurisdiction of the assets of the other party under any bankruptcy; or


 


e.                                       A party is
unable to pay its debts as they become due.


 


27.3                           Either party shall have the
right to terminate any development or Purchase Order for breach of a material
term or condition of this Agreement, if such breach continues for a period of
thirty (30) days after written notice thereof to the other.


 

















 


27.4                           If Customer defaults in the
payment of any sum due under this Agreement and does not cure such default
within thirty (30) days of written notice thereof from TAEC, then TAEC shall,
without further notice, have the immediate right to repossess and remove the
Product. Customer’s obligation to pay all charges which shall have accrued and
compensation, if any, which covers the actual costs incurred by TAEC as a
result of such termination, shall survive any termination of this Agreement.


 


28.          FORCE MAJEURE


 


Neither
party shall be responsible or liable in any way for failure or delay in
performing its obligations under these terms and conditions, other than
obligations to make payment, when such failure or delay is directly or
indirectly due to an act of God, war, threat of war, war-like conditions,
hostilities, sanctions, mobilization, blockade, embargo, detention, revolution,
riot, looting, striking, lockout, accident, fire, explosion, flood, inability
to obtain fuel, power, raw materials, labor, container or transportation
facilities, breakage of machinery or apparatus, government order or
regulations, or any other cause beyond its reasonable control.


 


29.          GOVERNMENT INTERVENTION


 


TAEC
reserves the right to adjust prices or quantities to equitably compensate for
increases in tariffs or similar charges, or for other government actions
resulting in curtailment, prevention, or taxation of imports. Unless otherwise
required by law, all prices will be quoted and billed exclusive of Federal,
state, and local excise, sales, and similar taxes, but inclusive of import
duties.


 


30.          EXPORT REGULATIONS


 


This
Agreement involves products and/or technical data that may be controlled under
the U.S. Export Administration Regulations and that may be subject to the
approval of the United States Department of Commerce prior to export. Any
export or re-export by either party, directly or indirectly in contravention of
the U.S. Export Administration Regulations, is prohibited.


 


31.          GENERAL


 


31.1                           Neither party shall assign
its rights and obligations under this Agreement without the prior written
consent of the other party, except that TAEC may assign the performance of any
of its obligations, including the manufacture of Prototypes or Products, to
Toshiba Corporation or its affiliates.


 


31.2                           These Terms and Conditions
shall be interpreted and governed by the laws of the State of California
without regard for its conflicts of laws principles, regardless of where any
action may be brought. The parties agree to submit to the exclusive
jurisdiction of the state and federal courts of the State of California. The
parties expressly agree that the UN Convention for the International Sale of
Goods shall not apply hereto.


 

















 


31.3                           All modifications to this
Agreement must be in writing and signed by both parties. Failure or delay of
either party to exercise any right or remedy hereunder shall not constitute a
waiver of rights or remedies under this Agreement.


 


31.4                           This Agreement is the
exclusive statement of the Terms and Conditions between the parties with
respect to the matters set forth herein, and supersedes all other prior or
contemporaneous agreements, negotiations, representations, tender documents,
and proposals, written and oral. Any additional or conflicting provisions
contained in Customer’s purchase order, or any purchase order acknowledgment
issued by TAEC shall not apply.


 


31.5                           If any provision of this
Agreement is held unenforceable or inoperative by any court of competent
jurisdiction, either in whole or in part, the remaining provisions shall be
given full force and effect to the extent not inconsistent with the original
terms of this Agreement.


 


31.6                           Any notice given hereunder
shall be sent in writing to the other party’s business address set forth on the
cover page hereof, or to such other party and address as such part shall
have designated most recently in writing. Notices directed to TAEC shall be
sent “Attention: Legal Department.”


 


31.7                           This Agreement may be
executed in several identical counterparts, each of which when executed by the
parties hereto and delivered shall be an original, but all of which together
shall constitute a single instrument.


 


31.8                           Articles 9, 12, 13, 15, 17,
19, 20, 24, 25, 26, 30 and 31 shall survive the termination or expiration of
this Agreement.