Exhibit 10.42


 











* Omitted and filed separately
with the SEC pursuant to a confidential treatment request


 


2nd AMENDMENT TO
ADVANCE PRODUCTION PAYMENT AGREEMENT


 


THIS 2nd AMENDMENT
TO THE ADVANCE PAYMENT AGREEMENT of March 17, 1997 (“this Amendment”), is entered
into this 25th day of March, 2004, by and among SEIKO EPSON
CORPORATION, a Japanese corporation having its principal place of business at
3-5, Owa 3-chome, Suwa-shi, Nagano-ken 392, Japan (“Epson”), EPSON ELECTRONICS
AMERICA, INCORPORATED (formerly known as S MOS Systems Inc.), a California
corporation, having a place of business at 150 River Oaks Parkway, San Jose, CA
95134-1951, U.S.A. (“EEA”) and Lattice Semiconductor Corporation, a Delaware
corporation, having a place of business at 5555 N.E. Moore Ct., Hillsboro,
Oregon 97124-6421, U.S.A. (“Lattice”).


 


RECITALS


 


WHEREAS the parties entered
into an Advance Production Payment Agreement (the “Agreement”) on or about
March 17, 1997, as amended on December 21, 2001;


 


WHEREAS the parties desire to
modify the Agreement and to set forth such mutually consensual modifications in
writing by way of this Amendment pursuant to Article 15.16 of the Agreement;


 


WHEREAS the parties entered
into a New Facility Wafer Purchase Agreement dated July 25, 1997, as amended on
December 21, 2001 (“New Facility Wafer Purchase Agreement”);


 


WHEREAS the parties will
contemporaneously amend any relevant provisions of the New Facility Wafer
Purchase Agreement so as to be consistent with this Amendment the amended
agreement is hereinafter referred to as the “Amended New Facility Wafer
Purchase Agreement”;


 


WHEREAS all references to
headings and provisions thereto in this Amendment correspond to those in the
Agreement;


 


NOW, THEREFORE, in
consideration of the premises and mutual covenants set out in the Agreement and
this Amendment, such Agreement is hereby amended and/or supplemented as
follows:


 

















 











* Omitted and filed separately
with the SEC pursuant to a confidential treatment request


 


1                      Background


 


1.1 Epson


 


Epson is in the business of designing, manufacturing, testing and
selling semiconductor devices, among other products.  Epson manufactures such semiconductor devices at its plant
located at 281 Fujimi, Fujimi-machi, Suwa-gun, Nagano-ken 399-0293, Japan (the “Fujimi
Facility”) , its plant located at 166-3 Jurizuka, Sakata-shi, Yamagata-ken
998-0194, Japan (the “Sakata Facility”) and its Subsidiary’s plant located at 686-1 Ichimiyake, Yasu-Cho, Yasu-gun,
Shiga-ken 520-2362, Japan (the “YSC Facility”).


 


2              Definitions


 


2.1           “APP” will mean the advance production payment of
Six Billion, Two Hundred Eighty-Three Million, Seven Hundred Thousand Japanese
Yen (JPY6,283,700,000) made by Lattice to Epson in the manner described in
Article 4.


 


2.6           “New Facility” will mean the [
* ] process lines constructed at the Site using the Equipment.


 


2.9           “Products” will mean those
specific types of New Facility Wafers fabricated using the same masks and the
same process flow and identified by the same series or product name or
number.  The Products will be ordered,
fabricated, delivered and sold pursuant to the terms and conditions of the Amended
New Facility Wafer Purchase Agreement. 
The Products which the parties desire to fabricate at the New Facility
will be agreed by and between Epson and Lattice, referring to the Process Road
Map for Lattice attached hereto as Exhibit B, which may be reviewed and amended
from time to time by mutual agreement of the parties.  The parties acknowledge however, that the final determination of
what Products will be fabricated may depend on the results of joint development
and product qualification.


 


“Products” will also mean those specific types of 6 inch wafers
fabricated by Epson for Lattice at Epson’s D Wing (Fujimi) and S Wing (Sakata) Fabs
that are credited against the APP pursuant to this Amendment and the Amended
New Facility Wafer Purchase Agreement.


 


2.18         “6 Inch Wafer(s)” will mean the
semi conductor wafers to be fabricated by Epson for Lattice at Epson’s D Wing
and S Wing Fabs.


 


2.19         “6 Inch APP Wafer(s)” will mean
the semiconductor wafers to be fabricated by Epson for Lattice at Epson’s D
Wing and S Wing Fabs that are to be credited against the APP pursuant to this
Amendment and the Amended New Facility Wafer Purchase Agreement.


 

















 


2.20         “8
Inch Wafer(s)” will mean the semiconductor wafers to be fabricated by Epson
for Lattice at Epson’s R Wing and T Wing Fabs.


 


2.21         “8 Inch APP Wafer(s)” will mean
the semiconductor wafers to be fabricated for Lattice at Epson’s R Wing and T
Wing Fabs that are to be credited against the APP pursuant to this Amendment
and the Amended New Facility Wafer Purchase Agreement.


 


2.22         “YSC Facility” will have the
meaning ascribed to it in Article 1.1.


 


2.23         “YSC Wafer(s)”
will mean the 8 inch semiconductor wafers to be fabricated by Epson’s
subsidiary for Lattice at the YSC Facility.


 


2.24         “YSC APP Wafer(s)” will mean the 8 inch semiconductor
wafers to be fabricated by Epson’s subsidiary for Lattice at the YSC Facility
that are to be credited against the APP pursuant to this Amendment and the
Amended New Facility Wafer Purchase Agreement.


 


2.25         “YSC Products” will mean those 8
inch wafers fabricated by Epson’s subsidiary at the YSC Facility that are
credited against the APP pursuant to this Amendment and the Amended New
Facility Wafer Purchase Agreement.


 


 


4              APP


 


4.1           APP


 


Lattice shall pay to Epson an
amount equal to Six Billion, Two Hundred Eighty-Three Million, Seven Hundred
Thousand Japanese Yen (JPY6,283,700,000) (“APP”), which APP will be credited
against certain future purchases by Lattice of 6 Inch APP Wafers, 8 Inch APP
Wafers, and YSC APP Wafers as provided in Article 5. As of this date, the
entire amount has been paid.


 


 


5              Credit of APP


 


5.1           Credit of APP


 


The purchase price of 6 Inch
APP Wafers, 8 Inch APP Wafers, and YSC APP Wafers purchased by Lattice under
the Amended New Facility Wafer Purchase Agreement will be credited against the
amount of the APP until the aggregate Japanese Yen value of all 8 Inch APP
Wafers (excluding the Free Wafers), 6 Inch APP Wafers, and YSC APP Wafers
(excluding the YSC Free Wafers) purchased and received by Lattice pursuant to
the Amended New Facility Wafer Purchase Agreement, as calculated pursuant to
Article 5.2, equals or exceeds the amount of the APP. It is the intention of
the parties to


 

















 


accelerate the APP prepayment
allocation using all 6 Inch APP Wafers, 8 Inch APP Wafers, and YSC APP Wafers
as purchased under terms and conditions of the Amended New Facility Wafer
Purchase Agreement. The criteria and time required for wafer acceptance by
Lattice will be described in the Amended New Facility wafer Purchase Agreement.


 


5.2           Calculation of Aggregate Credit Value


 


The amount of APP will be
offset and reduced on Japanese Yen to Japanese Yen basis, at the end of each
calendar month of this Agreement, by an amount equal to the Price for the 8
Inch APP Wafers multiplied by the total number of 8 Inch APP Wafers (excluding
the Free Wafers); plus the Price for the 6 Inch APP Wafers multiplied by the
total number of 6 Inch APP Wafers; plus the Price for the YSC APP Wafers
multiplied by the total number of YSC APP Wafers (excluding the YSC Free
Wafers) shipped to Lattice pursuant to the Amended New Facility Wafer Purchase
Agreement during the calendar month, with adjustment of the increase pursuant to
the methods provided in the Amended New Facility Wafer Purchase Agreement;
however under no circumstances shall the APP balance be increased, except as
provided for in Article 14.8 of this Agreement.


 


5.3           Invoices


 


Epson will cause EEA to provide
Lattice with invoices under the Amended New Facility Wafer Purchase Agreement
which, for the purpose of APP application, will specify the purchase price of
the 8 Inch APP Wafers, 6 Inch APP Wafers, and YSC APP Wafers.  Also, EEA shall provide Lattice and Epson
with the monthly report describing, among others, the outstanding balance of
the APP (after the application of all prior offsets, reductions and credits) as
of the commencement of the month subject to the invoices, the number of 8 Inch
APP Wafers and/or 6 Inch APP Wafers and/or YSC APP Wafers shipped to Lattice in
accordance with the Amended New Facility Wafer Purchase Agreement during that
calendar month and the applied Price, and the outstanding balance of the APP as
of the end of such calendar month.  Such
report shall be signed by the respective responsible person at Epson, EEA and
Lattice, provided that Lattice shall not be required to sign any such report
unless it is satisfied with the accuracy and completeness thereof.  Lattice may, for its signature, review all
invoices and reports for inaccuracies and if any such inaccuracies are found
and confirmed by Epson and EEA, Lattice may request to make corrections to
these invoices and reports.


 

















 












*
Omitted and filed separately with the SEC pursuant to a confidential treatment
request


 


6              Supply Commitment


 


6.2           Purchase Agreements


 


The parties
anticipate that the Amended New Facility Wafer Purchase Agreement will apply to
Products distributed by Lattice which require fabrication using the [ * ]
Micron


 

















 


Process and to
the 6 Inch APP Wafers; provided, however, that the Supply Commitment applies
only to New Facility Wafers.


 


 


8              Free Wafers


 


8.1           YSC Free Wafers


 


As a consideration for
Lattice’s payment of APP, Epson shall provide Lattice with [ * ] free YSC Wafers
of a YSC Product manufactured in the YSC Facility (“YSC Free Wafers”) through
EEA pursuant to the Amended New Facility Purchase Agreement for every [ * ] YSC
Wafers ordered by Lattice towards the offset of APP after the execution of this
Agreement [ * ]. The number of such free wafers will be included in the
calculation of total free wafers pursuant to section 8 above. For the purpose
of calculating the number of YSC Free Wafers earned by Lattice, only YSC APP
Wafers ordered by Lattice will count toward YSC Free Wafers. If at any time
Lattice should cease doing business with the YSC Facility, any YSC Free Wafers
earned, plus the remaining balance of YSC APP Wafers ordered toward YSC Free
Wafers, will be counted as if they were New Facility 8 Inch APP Wafers.


 


 


10            Wafer Pricing and Payment


 


10.1         Determination of Price


 


The
general method for determining the price of Products (“Price”) shall be as set
forth in Exhibit E.  Epson agrees that
at any time the Prices to Lattice [ * ]. 
The Price herein shall be applicable until Lattice has completed the
purchase of [ * ] New Facility Wafers under the terms of this Agreement.


 


10.3         Payment


 


Unless
otherwise stated in this Agreement or this Amendment, other than through offset
of the APP, Lattice will not be required to pay for any 8 Inch APP Wafers, 6
Inch APP Wafers, or YSC APP Wafers delivered under this Agreement or the
Amended New Facility Wafer Purchase Agreement until the


 

















 












* Omitted and filed separately with the SEC pursuant to a confidential
treatment request


 


APP has been fully offset and reduced. 
Once the APP is fully offset and reduced, Lattice will be required to
pay Epson for New Facility Wafers in the manner specified in the Amended New
Facility Wafer Purchase Agreement based on the Price until Lattice has
completed the purchase of [ * ] New Facility Wafers under the terms of this
Agreement. Once the APP has been fully offset and reduced, Lattice will be
required to pay Epson for 6 Inch Wafers in the manner specified in the Six Inch
Wafer Purchase


 

















 


Agreement and for YSC Wafers in the manner specified in the Amended New
Facility Wafer Purchase Agreement.


 


15            Miscellaneous


 


15.7         Notices and Comunications


 


Any notices required or permitted to be given hereunder will be in
English and be sent by (i) registered airmail or (ii) cable, facsimile or telex
to be confirmed by registered airmail, addressed to:


 


	
  To Epson:

  
	
   

  	
  281 Fujimi,
  Fujimi-machi, Suwa-gun

  
	
   

  	
  Nagano-ken
  399-0293, Japan

  
	
   

  	
  Attn:

  	
  Yasumasa
  Otsuki

  
	
   

  	
   

  	
  Managing Director
  and Chief Executive of

  
	
   

  	
   

  	
  Semiconductor
  Operations Division

  
	
   

  	
  Tel:

  	
  81-266-61-1211

  
	
   

  	
  Fax:

  	
  81-266-61-1271

  
	
   

  
	
  To EEA:

  
	
   

  	
  150 River
  Oaks Parkway, San Jose, CA  95134–1951

  
	
   

  	
  U.S.A.

  
	
   

  	
  Attn:

  	
  Nobuyoshi
  Takei

  
	
   

  	
   

  	
  President
  and Chief Executive Officer

  
	
   

  	
  Tel:

  	
  1-408-576-4354

  
	
   

  	
  Fax:

  	
  1-408-535-8688

  
	
   

  
	
  To Lattice:

  
	
   

  	
  5555 N.E.
  Moore Ct., Hillsboro, OR  97124-6421

  
	
   

  	
  U.S.A.

  
	
   

  	
  Attn:

  	
  Cyrus Tsui

  
	
   

  	
   

  	
  Chairman and
  Chief Executive Officer

  
	
   

  	
  Tel:

  	
  1-503-268-8000

  
	
   

  	
  Fax:

  	
  1-503-268-8077

  



 


Any such notice will be deemed
given at the time of its receipt by the addressee.


 


The foregoing or forthcoming
provisions in this Amendment shall replace and supercede the corresponding
provisions in the Agreement and Exhibits. 
Where a foregoing or forthcoming provision in this Amendment has no corresponding
provision in the Agreement or Exhibits, such provision shall supplement the
Agreement or Exhibits. The


 

















 


remainder of the Agreement and
Exhibits, as amended, shall remain in full force and effect.


 


 


IN WITNESS WHEREOF, the parties
have signed this Amendment as of the date first above written.


 


 


LATTICE SEMICONDUCTOR
CORPORATION


 


 


	
  By:

  	
   

  	
  /s/ Jonathan Yu for Cyrus Tsui

  	
   

  
	
  Name:

  	
  Cyrus Tsui

  
	
  Title:

  	
  Chairman and
  Chief Executive Officer

  



 


 


SEIKO EPSON CORPORATION


 


 


	
  By:

  	
   

  	
  /s/ Yasu Otsuki

  	
   

  
	
  Name:

  	
  Yasumasa
  Otsuiki

  
	
  Title:

  	
  Managing Director
  and Chief Executive of Semiconductor Operations Division

  



 


 


EPSON ELECTRONICS AMERICA, INC.
(formerly S MOS SYSTEMS, INC.)


 


 


	
  By:

  	
   

  	
  /s/ Nobuyoshi Takei

  	
   

  
	
  Name:

  	
  Nobuyoshi
  Takei

  
	
  Title:

  	
  President
  and Chief Executive Officer

  



 

















 











* Omitted and filed separately
with the SEC pursuant to a confidential treatment request


 


EXHIBIT C


“Payment Schedule”


[Provision
4 under this Exhibit C is hereby deleted by this Amendment]


 


 


EXHIBIT E


“Price Determination Procedure”


[ * ]


 


“APP Offset Procedure”


[ * ]