Document:

Exhibit 10.2

 

ASIC DESIGN AND PRODUCTION AGREEMENT

 

between

 

OPEN-SILICON, INC.

490 N. McCarthy Blvd., Suite 220

Milpitas, CA 95035

 

and

 

NETLIST, INC.

51 Discovery, Suite 150

Irvine, CA 92618

 

	
  Customer Contact:

  	
   

  	
   

  	
  Telephone No:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fax No.:

  	
   

  	
   

  	
  Email Address:

  	
   

  

 

Effective Date

 

OPEN-SILICON
CONFIDENTIAL               

 

1

 

OPEN-SILICON ASIC DESIGN AND PRODUCTION AGREEMENT

 

THIS ASIC DESIGN AND PRODUCTION AGREEMENT (this “Agreement”) is made and entered as of
                    ,
2010 (the “Effective Date”) by and between OPEN-SILICON, INC., a Delaware corporation with its
principal place of business at 490 North McCarthy Boulevard, Suite 220,
Milpitas, California 95035 (“Open-Silicon”)
and NETLIST, INC., a Delaware  corporation with its principal place of business at 51
Discovery, Suite 150, Irvine, California 92618 (“Customer”),
for purposes of setting forth the terms and conditions governing the
manufacture and sale by Open-Silicon of one or more ASIC devices for Customer,
as further specified in one or more Statements of Work (each, a “Statement of Work” or “SOW”) attached
hereto as Exhibit A and incorporated herein.

 

1.                                      DEFINITIONS.  Any capitalized terms that are used herein
shall have the meanings set forth below or, if not set forth below, the
meanings ascribed to them in the other exhibits to this Agreement.

 

1.1                               “Delivery
Release” means Customer’s authorization to ship a definite
quantity of Products on a specified schedule.

 

1.2                               “Design Respin” is a redesign of a
Product due to a deficiency in the initial design of the Product, as evidenced
in the Prototypes.

 

1.3                               “Intellectual Property Rights” shall mean all intellectual
property rights, including, without limitation, patents, copyrights, authors’
rights, mask work rights, trademarks, trade names, know-how and trade secrets,
irrespective of whether such rights arise under U.S. or international
intellectual property, unfair competition or trade secret laws.

 

1.4                               “IP Provider” is a third party provider
of intellectual property and/or the embodiments of such intellectual property,
by way of license, sale, or otherwise.

 

1.5                               “Macrocell”
shall mean the hardware implementation of any functions requested by Customer
and furnished by Open-Silicon or its suppliers that Open-Silicon makes
available for incorporation by Customer into a specified Product.

 

1.6                               “Macrofunctions”
shall mean the software implementation of any functions requested by Customer
and furnished by Open-Silicon or its suppliers that Open-Silicon makes
available for incorporation by Customer into a specified Product.

 

1.7                               “Netlist”
shall mean the list form in Verilog or other format of a structural circuit
implementation describing the basic design building blocks and their logical
connections.

 

1.8                               “Product” means an
application specific integrated circuit (ASIC) described or referenced in a
Statement of Work, and unless otherwise specified, refers to Production Units
and Prototypes.

 

1.9                               “Project
Technology” means (i) the [***]
and any [***] in the performance of this Agreement and (ii) [***] in the
performance of this Agreement, and [***] (or otherwise in a writing signed by
both parties) or are [***].

 

1.10                        “Prototypes” are
engineering samples or the preliminary implementations on silicon of a
specified Product, which are intended for internal use, and are not yet
qualified and approved for production.

 

2

 

1.11                        “Prototype
Approval” occurs when Customer has completed the Prototype
Approval Form attached hereto as Exhibit B-1,
certifying that the Prototypes meet the agreed to specifications.

 

1.12                        “Production
Units” means product manufactured after Prototype Approval and Release to
Production.  Production Units do not
include Prototypes or Risk Product.

 

1.13                        “Project” shall mean the
ASIC project specified in the applicable Statement of Work.

 

1.14                        “Purchase
Order” is Customer’s document setting forth specific Products ordered and
including Delivery Release information.

 

1.15                        “Release
to Production” occurs when Customer has completed the Release to
Production Form attached hereto as Exhibit B-2.

 

1.16                        “Risk
Product” is Product (other than Prototypes) ordered by
Customer pursuant to a Delivery Release for a delivery date occurring before
Release to Production.  For the avoidance
of doubt, [***].

 

1.17                        “Services” shall mean the
ASIC design and manufacturing services to be performed by Open-Silicon (or by a
third party on behalf of Open-Silicon) as set forth in a Statement of Work, and
any related consulting services.

 

1.18                        “Statement of Work” or “SOW” means a document which sets
forth the responsibilities and deliverables of each party within the Project.

 

1.19                        “Subcontractor” is a third party
(other than an IP Provider) who provides services to a party in furtherance or
fulfillment of its obligations to the other party under this Agreement.

 

1.20                        [***] means the
occurrence of any of the following: (i) [***], (ii) [***] of this
Agreement by Open-Silicon [***], (iii) [***] or other similar laws, (iv) [***];
or (v) [***].

 

2.                                      ASIC
DEVELOPMENT AND PRODUCTION.

 

2.1                               Development
Services.  The development
activities for Products covered by this Agreement shall be set forth in one or
more SOWs developed and mutually agreed to by the parties.  Each SOW shall set forth the responsibilities
and deliverables of each party regarding the development of the Products.  Each party will perform its obligations and
deliver its deliverables as set forth in and in accordance with the applicable
SOW, and each party will cooperate with the other for the timely achievement of
Project milestones.  In performing the
Services, Open-Silicon shall provide its own personnel, equipment, tools and
other materials at its own expense. 
Customer will promptly acknowledge the completion of each milestone (at
the request of Open-Silicon, such acknowledgement shall be in writing in
substantially the form of Exhibit D).
Customer acknowledges and agrees that Open-Silicon’s ability to perform the
Services and to deliver its deliverables may be dependant upon Customer’s
timely delivering certain deliverables or information as set forth in the
applicable SOW.  In the event that
Open-Silicon cannot timely meet its development or delivery obligations due
late delivery of such Customer deliverables and/or information, the parties
shall renegotiate in good faith any affected schedule as reasonably necessary
in light of the extent and nature of the delay.

 

2.2                               ECO
Process.  Open-Silicon
will [***] to implement Customer’s requests for changes to the SOW and/or the
design of the Products (“Change(s)”),
provided such Changes are technically feasible. 
Customer will submit requested Changes in writing.  Open-Silicon will promptly evaluate such 

 

3

 

requests and inform Customer in writing of the
potential effects on the SOW [***], including: (i) effect on the original
schedule, (ii) effect on the engineering development charges, (iii) effect
on the estimated production unit pricing due to die size, package or other
changes, and (iv) other relevant factors. 
Any Changes that are mutually agreed to in writing shall be documented
in accordance with Open-Silicon’s Engineering Change Order process (“ECO Process”) described in Exhibit C. The parties will discuss in good faith any
requested Changes and any impacts of pricing and scheduling of such
Changes.  Unless Changes are mutually
agreed to in writing by the parties, the parties will continue their respective
activities under the SOW without making any modifications to the SOW and/or the
design of the Products.

 

2.3                               Delivery
of Prototypes.  Upon
completion of the engineering milestones specified in the SOW, Open-Silicon
will manufacture and deliver the Prototype units to Customer in accordance with
the SOW. Open-Silicon shall test each Prototype with the test program as
specified in the SOW prior to delivery and shall provide all test results to
Customer together with the Prototypes (provided, however, that such test
results shall not be binding on Customer). 
The parties’ activities in such regard will be further defined within
the SOW. Customer acknowledges the Prototypes are delivered and intended for
evaluation purposes only and are not intended for other use or resale for use
in any system or application.

 

2.4                               Prototype
Evaluation.  Customer will
promptly evaluate the Prototypes and advise Open-Silicon in writing whether the
Prototypes conform to agreed upon specifications for the Product, as set forth
in the SOW.  The prototype evaluation
period shall not exceed [***] after shipment of initial prototypes (the “Prototype Evaluation Period”).  If Customer concludes during the Prototype
Evaluation Period, that the Prototypes are not conforming, then Customer will
submit a written notice of rejection (“Notice
of Prototype Rejection”) to Open-Silicon describing in reasonable
detail the perceived deficiency or nonconformance of the prototype.  [***]. 
Customer may accept the Prototypes prior to the expiration of the
Prototype Evaluation Period by signing and submitting to Open-Silicon a
Prototype Approval Form attached hereto as Exhibit B-1.

 

2.5                               Effect
of Notice of Prototype Rejection.  If Customer
submits a Notice of Prototype Rejection, the Parties will mutually cooperate to
determine the source of any Prototypes nonconformance stated in the Notice of
Prototype Rejection. Further, Customer and Open-Silicon will cooperate to
resolve and, as appropriate, to develop and implement a corrective action plan,
to remedy all reported defects. 
Open-Silicon shall deliver a corrected version of such Prototype within
a reasonable period of time given engineering time and manufacturing lead
times.  The process detailed in Sections
2.3, 2.4 and 2.5 shall be repeated until the Prototypes successfully pass
Customer’s evaluation in accordance with Section 2.4 (“Conforming Prototypes”), and the cost for
such repeated procedure shall be borne by Open-Silicon; provided, however, that
if a Design Respin is required for any reason other than an error or deficiency
resulting from the design services provided by Open-Silicon or its
Subcontractors, Customer will be liable for the costs associated with the
Design Respin. If Open-Silicon fails to deliver Conforming Prototypes after the
foregoing procedure is [***] shall [***] of this Agreement and [***] may, in
its [***] either (i) [***], or (ii) [***] and [***].

 

2.6                               Changes
to Functionality or Performance. In the event that Customer
desires to change the functionality or performance of the Product (either
before or after delivery of Prototypes) and receive new Prototypes prior to
Release to Production, Customer and Open-Silicon will develop a new mutually
agreed upon SOW or will amend the existing SOW, in accordance with the ECO
Process set forth in Section 2.2.

 

2.7                               Risk
Product.  Prior to Release to Production,
Customer may request the delivery of Risk Product.  The provision by Open-Silicon of Risk Product
to Customer will be subject to the terms of this Section 2.7, as well as
such other terms and conditions separately agreed to by the parties.  [***].  Customer assumes full responsibility and
liability for Risk Product, including but not limited to all work in process
(WIP) without regard to issues of design or performance.

 

4

 

2.8                               Acceptance
Prior to Manufacturing.  Open-Silicon
will not commence production of Production Units until Customer confirms the
Release to Production of the Product by signing and submitting a Release to
Production Form attached hereto as Exhibit B-2,
and submitting a purchase order for the units as set forth in Section 4.2.

 

2.9                               Escrow.  Within [***]
after the Effective Date, Open-Silicon and Customer will enter into a
technology escrow agreement (the “Escrow
Agreement”), with terms reasonably satisfactory to both parties,
with [***] or another escrow agent designated by Customer (“Escrow Agent”).  Thereafter, Open-Silicon will deposit with
the Escrow Agent the following items on a regular basis (i.e., as soon as they are developed or
created) during the term of this Agreement: (a) all [***] developed,
created or obtained by or for Open-Silicon, and (b) such [***] in [***]
possession necessary or useful to enable a [***] or other relevant vendors to
[***] and collectively with the [***] will [***] to ensure that the Escrow
Materials deposited with the Escrow Agent are kept current.  Customer shall be responsible for any and all
payments to the Escrow Agent associated with such Escrow Agreement; provided
that in the event of [***].  The parties
agree, and the Escrow Agreement will specify, that upon receipt by the Escrow
Agent of a written notice from [***] has occurred, [***] will immediately [***]
(i) [***] and (ii) [***] hereby covenants that it will [***] until
the [***] further agrees that [***]
created or developed [***] hereunder will [***] to perform the Services on
[***] to [***] unless and until [***] or a [***].

 

3.                                      COMPENSATION
FOR DESIGN SERVICES.

 

3.1                               NRE
Fees.  Design engineering charges
for Product development are set forth in the applicable SOW and are based on
the specifications and assumptions therein (“NRE
Fees”).  Customer will pay the
NRE Fees in accordance with the milestone schedule set forth in the applicable
SOW.  Unless otherwise specified in the
SOW, Open-Silicon will invoice Customer upon successful completion of each such
milestone (which shall be determined in accordance with the acceptance criteria
and procedure set forth in this Agreement and the applicable SOW).  Payments relating to a milestone, the
completion of which has been acknowledged by Customer, [***].  Payment of NRE Fees will be payable within
[***] after Customer’s receipt of the invoice. 
If Customer requests changes to the specifications or the SOW that
increase the cost of the development, Open-Silicon will evaluate the requested
changes and notify Customer in writing of the increased costs that Customer
will be required to pay, in accordance with Section 2.2.

 

3.2                               Taxes.  Each
party shall bear and be responsible to pay any tax (and any related
interest or penalty), however designated, legally imposed upon it with respect
to the design and development activities contemplated by this Agreement.

 

4.                                      FORECASTING
AND ORDERS FOR PRODUCTION UNITS.

 

4.1                               Forecasts.  Following Release to
Production, Customer shall provide Open-Silicon, on a monthly basis,
good-faith, non-binding rolling forecasts of its purchase requirements for the
Production Units, [***] following the month in which the forecast is submitted
(each, a “Forecast”). Any
Forecasts provided by Customer are for planning purposes only and do not
constitute a Delivery Release or other commitment by Customer. Customer shall
have no obligation with respect to the purchase of Products under this
Agreement until such Products are specified in an issued Purchase Order that
contains specific Delivery Release dates for specific Products.

 

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4.2                               Purchase
Orders.  Customer may order
Production Units from time to time by issuing a purchase order to Open-Silicon
for such units.  Open-Silicon shall
confirm its receipt of such purchase order within [***] in a written
acknowledgment to Customer.  Such
purchase order shall not request delivery inconsistent with the applicable lead
time (as set forth in the applicable SOW) without a line item for the
appropriate expedite fees. Customer’s purchase orders and Forecasts may [***]
for Production Units set forth in the applicable SOW.  Open-Silicon will not be obligated to make
shipments [***]. Any Customer purchase order received by Open-Silicon that complies
with the foregoing (a “Purchase Order”)
shall be binding on Customer and Open-Silicon. 
All Purchase Orders and Open-Silicon’s acknowledgements shall be subject to and expressly limited to the
terms and conditions of this Agreement and the applicable SOW and any terms or
conditions contained in Purchase Orders or acknowledgements (or in other
documents issued by either party) that are inconsistent with or in addition to
the terms and conditions contained in this Agreement or the applicable SOW
shall be of no force or effect, regardless of any failure
of Open-Silicon or Customer to object to such terms or conditions, unless expressly accepted in writing by both parties.

 

4.3                               Supply Commitment. 
During the term of this Agreement, Open-Silicon agrees to
supply to Customer [***] of Customer’s requirements for the Production Units,
as specified in Purchase Orders that are [***] of the then-current
Forecast.  Notwithstanding the foregoing,
Customer understands that yields for Production Units are subject to
fluctuations; therefore, Customer will accept delivery of and accept as full
performance: (a) [***] or (b) [***] of the total quantity ordered,
with price adjusted for the quantity actually delivered.

 

5.                                      CANCELLATION
AND RESCHEDULING OF ORDERS.

 

5.1                               Cancellation.  Upon
notice to Open-Silicon, Customer may cancel any Purchase Order or portion
thereof at any time, subject only to the applicable cancellation fees set forth
below:

 

	
  Time of cancellation

  	
   

  	
  Cancellation fee (percentage of

  sales price of cancelled units)

  
	
  [***] weeks or more prior to the delivery date

  	
   

  	
  [***]

  
	
  [***] weeks prior to the delivery date

  	
   

  	
  [***]

  
	
  [***] weeks prior to the delivery date

  	
   

  	
  [***]

  
	
  [***] weeks prior to the delivery date

  	
   

  	
  [***]

  

 

Notwithstanding
the above, Open-Silicon shall use commercially reasonable
efforts to mitigate any damages or expenses it may incur due to Customer’s
cancellation of a Purchase Order (or a portion thereof) by redeploying the
Production Units ordered in such Purchase Order to other Purchase Orders of
Customer, and Customer’s payment obligation under this Section shall be
reduced accordingly.  For purposes of
this Section 5.1, “delivery date” with respect of any Purchase Order or
portion thereof which has been rescheduled under Section 5.2 shall be
deemed to mean the delivery date prior to any rescheduling; provided, however,
that any rescheduling of more than thirteen (13) weeks prior to the delivery
date shall be deemed a new Purchase Order with a new delivery date.

 

5.2                               Rescheduling.
Each Purchase Order may be deferred by Customer no more than [***] time
and by no more [***], subject to the terms of this Section 5.2.  Customer acknowledges and agrees that the
right to defer or reschedule an order will be subject to the scheduling
flexibility of the foundry.  Moreover,
Customer agrees that, in the event that Customer requests to reschedule an
order as permitted by this Section 5.2, Customer shall be responsible for
reimbursing any costs incurred by Open-Silicon as a result of such
rescheduling.  Notwithstanding the
foregoing, any Purchase Orders with scheduled delivery dates beyond the
applicable lead time may be rescheduled by Customer at any time upon written notice
to Open-Silicon, provided that [***] incurred by Open-Silicon as a result of
accommodating Customer’s request.

 

6

 

5.3                               Process
Discontinuance by Foundry.  If for any
reason, Open-Silicon’s third party foundry supplier discontinues a process,
Open-Silicon shall give Customer written notice thereof [***] prior to the last date on which Customer can place an order for Production Unit(s) to
be affected by such process discontinuance, and will use its diligent
efforts to provide Customer with longer than [***] notice of same.  If such foundry discontinues or is expected to
discontinue a process, Open-Silicon shall [***] to a [***] and shall provide
[***] to effect a smooth and seamless transition.

 

6.                                      TITLE
AND DELIVERY.

 

6.1                               Deliveries.  All shipments to delivery
destinations are made [***] at the [***]. All Products shall be deemed accepted
by Customer upon delivery at point of shipment, subject to the Limited Product
Warranty set forth in Section 10. 
Title to Production Units and risk of loss pass to Customer, or in the
case of a Drop Shipment (as defined below), to the receiving party of the
shipment (unless such receiving party is serving as Customer’s agent, in which
event, title and risk of loss will pass to Customer), upon [***]. In the
absence of written instructions from Customer, all Products shall be packed and
prepared for shipment in a manner that: (i) follows good commercial
practice; (ii) is acceptable to common carriers for shipment at the lowest
rate; and (iii) is adequate to ensure safe arrival.  Open-Silicon shall mark all containers with
Purchase Order number, lot tracking information, date of shipment, and Customer’s
and Open-Silicon’s names, provided in the event that any shipments are made to
Customer’s customers (“Drop Shipments”),
upon Customer’s request, Open-Silicon’s name will be omitted from the
containers.  Shipment of Production Units
may originate from either Open-Silicon or its Subcontractors or authorized
distributors.

 

6.2                               Delivery
Timeframes.  Open-Silicon
will deliver Products in accordance with the delivery dates set forth in
Customer’s Purchase Order.  In the event
that Production Units ordered in a Purchase Order are delivered late solely due
to Open-Silicon’s (excluding its Subcontractors’) delay, Customer will be
entitled to deduct from the payments otherwise due to Open-Silicon for such
Purchase Order an amount equal to [***] of the total amount of such payments
for each week the shipment is late, [***] provided, however, that if the
delayed Production Units are delivered to Customer within [***] of the
scheduled delivery date, such deduction will be waived.  Without limiting the generality of the
foregoing, Open-Silicon will give Customer prompt notice if it reasonably
expects a delay in meeting a delivery date or that only a portion of the Products
will be available for shipment to meet a delivery date, and Open-Silicon will
specify the reasons therefor.  For
partial shipments, Open-Silicon will ship the available Products unless
directed by Customer to reschedule a shipment. Customer may specify a delivery
destination other than its own premises (e.g., Drop Shipment) in order to
facilitate delivery directly to its customers. Open-Silicon does not require
that delivery be made directly to Customer. For the avoidance of doubt,
Customer will be responsible for all costs relating to shipment.

 

6.3                               Early
Deliveries.  If Products
are delivered more than [***] in advance of the Delivery Dates, Customer may,
at its option, either return the Products at Open-Silicon’s expense or keep the
Products with payment due as provided in this Agreement.

 

6.4                               Die Banking.  Open-Silicon
will provide die banking services to Customer in accordance with the terms and
conditions of Exhibit E (“Die Banking”). Customer shall order
sufficient material be held in die bank to assure continued supply of product
within its Forecast.

 

7

 

7.                                      PRODUCTION
UNITS PRICING AND PAYMENT.

 

7.1                               Pricing.  Product pricing is set forth
in the SOW.  Both parties acknowledge and
agree that pricing will not be known until die size is fixed and actual
performance frequency and yield of the design is established.  If die size increases or performance/yield is
marginal, then Open -Silicon may in good-faith increase pricing in accordance
with such changes and to the extent that such price increase shall be
reasonable

 

7.2                               Payment.  Unless otherwise agreed,
payment terms are [***] from receipt of invoice by Customer. For overdue
invoices that are not reasonably disputed by Customer, Customer will pay
Open-Silicon interest on the overdue amount at a rate of [***] for each month
or part of a month (or the maximum rate allowed by law, whichever is less) that
the payment is overdue.  For the
avoidance of doubt, for Product invoices, Open-Silicon will invoice Customer
upon Product shipment, unless shipment is not made (at Customer’s request), in
which event, Open-Silicon will invoice Customer when such Product is ready for
shipment.  Unless otherwise instructed by
Open-Silicon in writing, all amounts payable to Open-Silicon shall be paid by
company check, tendered to such address as Open-Silicon shall designate in an
invoice or other notice. Should the parties agree that payments will be made by
wire transfer, then Customer shall instruct the paying financial institution to
route all domestic wire transfers via FEDWIRE).

 

7.3                               Taxes.  Customer is responsible for
and will pay any tax on Production Units. 
The prices specified in each applicable quote and/or SOW excludes all
duties, taxes and excises and specifically excludes value-added tax (VAT) relating
to Production Units.  Open-Silicon shall
separately state such taxes if it is required by law to collect such taxes, and
Customer agrees to pay such amounts.  The
parties will reasonably cooperate to take advantage of benefits provided by any
tax treaties.

 

8.                                      TERM.

 

This
Agreement shall commence as of the Effective Date and, subject to Section 9.4
below and unless earlier terminated in accordance with Section 9 (“Termination”),
shall remain in force for a period of [***], except that [***] will [***] after
the Effective Date.

 

9.                                      TERMINATION.

 

9.1                               Termination
for Cause.  Either party
may terminate this Agreement and/or any or all SOWs upon at least [***] prior
written notice if the other party materially breaches any term or condition
hereof and fails to cure the breach within the notice period.  The parties acknowledge that any breach of
Sections 4.3 or 7.1 shall be deemed a material breach of this Agreement.

 

9.2                               Termination
for Infringement.  Open-Silicon
may, upon written notice to Customer, suspend its obligations under an SOW in
respect of certain Products where Open-Silicon reasonably believes, after good
faith discussions with Customer, that a third party suit or action brought
against Open-Silicon and/or Customer alleging that the design, manufacture, or
sale of such Products violates the intellectual property rights of the third
party has merits.  A suspension under
this Section 9.2 that continues for more than [***] shall be deemed a
termination of the SOW for such Products.

 

9.3                               Termination
for Business Discontinuity.  Either party
may terminate this Agreement and/or any or all SOWs in the event that the other
party (a) becomes insolvent, otherwise unable to pay its debts as they
mature, makes an assignment for the benefit of creditors, or files, or has
filed against it (which is not dismissed in [***]), any claim for an action in
bankruptcy or under any other debtor, insolvency, liquidation, or other similar
laws, or (b) dissolves, or otherwise ceases doing business in the ordinary
course.

 

8

 

9.4                               Effect
of Termination.  Upon
termination, each party will return to the other, or at the other party’s
request, destroy (and certify in writing as to such destruction), all
Confidential Information in such party’s possession provided by the other
party, provided that (i) in the event that there is any dispute arising
out of or relating to this Agreement or the termination thereof, each party
will be permitted to retain such information as may be relevant to resolution
of that dispute but use such information solely in the resolution of the
dispute and not for any other purpose, including but not limited to, any
commercial use, and when such dispute is resolved, each party will return the
retained Confidential Information to the other party; (ii) Open-Silicon
will be permitted to retain such information as is necessary for Open-Silicon
to perform its surviving obligations under this Agreement; and (iii) Customer
will be permitted to retain such information as is necessary for Customer to
perform its surviving obligations or exercise surviving rights under this
Agreement. Customer remains liable to pay Open-Silicon for Products and
Services received (and accepted, if applicable) through the respective date of
termination, and any applicable cancellation charges hereunder. [***]. The
following sections will survive any expiration or termination of this
Agreement: Section 1 (“Definitions”); Section 2.7 (“Risk Product”)
(solely with respect to the warranty disclaimer), Section 2.9 (“Escrow”); Section 3
(“Compensation for Design Services”) (solely with respect to amounts incurred
upon or prior to expiration or termination); Section 7 (“Production Units
Pricing and Payment”); Section 9.4 (“Effect of Termination”); Section 10
(“Limited Product Warranty; Disclaimer”) (solely with respect to the warranty
disclaimers); Section 11 (“Limitation of Liability”); Section 12 (“Confidentiality
and Publicity”); Section 13 (“Intellectual Property Ownership; Licensing”)
(except for Section 13.4); Section 14 (“Indemnification”); Section 17
(“Governing Law”); and Section 18 (“Miscellaneous”).  Notwithstanding anything to the contrary,
upon any termination or expiration of this Agreement, Customer shall be
permitted to sell all remaining inventory of Products in Customer’s possession,
and to retain all Prototypes and related design information to permit providing
maintenance and support services to its customers.

 

10.                               LIMITED
PRODUCT WARRANTY; DISCLAIMER.

 

10.1                        Limited
Product Warranty.  Open-Silicon
warrants solely to Customer that Production Units delivered hereunder will
[***] approved by Customer and, if properly used, will be [***] for [***]
following the date of receipt of the Production Units by Customer. Except as
expressly set forth in this Agreement (or an SOW), Open-Silicon makes no
warranty with respect to any Services, Prototypes, or Risk Product.  [***].

 

10.2                        Remedy.  If any Production Unit
furnished by or for Open-Silicon fails to conform to the warranty provided in Section 10.1
(“Limited Product Warranty”),
Open-Silicon’s sole and exclusive liability and Customer’s sole and exclusive
remedy will be, at Open-Silicon’s option and expense, to promptly repair or
replace the Production Unit, or if repair or replacement is not technically
feasible, refund to Customer an amount equal to the price paid for any such
Production Unit which fails during the applicable warranty period, provided
that: (a) Customer notifies Open-Silicon in writing during the warranty
period indicated above that such Production Unit is defective and furnishes an
explanation of the deficiency; (b) upon Open-Silicon’s request, such
Production Unit is returned, either to Open-Silicon’s service facility or to
such other facility designated by Open-Silicon, at Open-Silicon’s risk and
expense; and (c) the claimed deficiencies exist and were not caused by
accident, misuse, neglect, improper installation, improper testing or
unauthorized alteration or repair (all of which will operate to void the
warranty provided herein).  If such
Production Unit is defective, and Open-Silicon elects to repair or replace it,
the transportation charges for the repaired or replaced Production Unit from
Open-Silicon to Customer within the USA will be paid by Open-Silicon.  For all other locations, the Limited Product
Warranty excludes all costs of shipping, duty, customs clearance, and other
related charges.  A repaired or replaced
Production Unit will continue to be warranted for the longer of [***] from the
original shipment date of the defective Production Unit or [***] after Customer
receives the replacement or repaired Production Unit.  All Production Units returned to Open-Silicon
shall be returned in accordance with Open-Silicon’s return material
authorization procedure. [***].

 

9

 

10.3                        Disclaimer.
[***].

 

10.4                        Third
Party Technology.  Customer will
be responsible for all third party technology provided or requested by Customer
to be included in the Product to ensure that such technology is compatible
with, and suitable for, Customer’s intended purposes and applications.

 

11.                               LIMITATION
OF LIABILITY.

 

11.1                        Consequential
Damages Disclaimer. [***], IN NO EVENT WILL EITHER PARTY OR ITS SUPPLIERS
BE LIABLE FOR ANY INCIDENTAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES
WITH RESPECT TO PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT, INCLUDING
WITHOUT LIMITATION LOST PROFITS, INTERRUPTION OF BUSINESS, OR COST OF
PROCUREMENT OF ANY SUBSTITUTE GOODS OR SERVICES, REGARDLESS OF WHETHER SUCH
PARTY HAS ADVANCE NOTICE OF THE POSSIBILITY OF SUCH DAMAGES.

 

11.2                        Damages
Limitation. [***], IN NO EVENT WILL
EITHER PARTY’S TOTAL CUMULATIVE LIABILITY TO THE OTHER PARTY ARISING OUT OF OR
RELATED TO THIS AGREEMENT EXCEED THE HIGHER OF (A) THE AMOUNTS PAID OR PAYABLE
BY CUSTOMER TO OPEN-SILICON UNDER THIS AGREEMENT, AND (B) AN AMOUNT EQUAL
TO THE NRE FEES PAID OR TO BE PAID BY CUSTOMER UNDER THIS AGREEMENT.

 

11.3                        Indemnity.  [***] WILL OPEN-SILICON BE OBLIGATED TO
INDEMNIFY CUSTOMER OR ANY THIRD PARTY WITH RESPECT TO ANY CLAIM ARISING OUT OF
OR RELATED TO THIS AGREEMENT.

 

11.4                        Limitations
Essential.  THE PARTIES ACKNOWLEDGE THAT
THESE LIMITATIONS ON POTENTIAL LIABILITIES WERE AN ESSENTIAL ELEMENT IN SETTING
CONSIDERATION UNDER THIS AGREEMENT AND THAT, IN THE ABSENCE OF SUCH
LIMITATIONS, THE ECONOMIC TERMS OF THIS AGREEMENT WOULD BE SUBSTANTIALLY
DIFFERENT.  LIABILITY FOR DAMAGES SHALL
BE LIMITED AND EXCLUDED, EVEN IF ANY EXCLUSIVE REMEDY PROVIDED FOR IN THIS
AGREEMENT FAILS OF ITS ESSENTIAL PURPOSE.

 

12.                               CONFIDENTIALITY
AND PUBLICITY.

 

12.1                        Confidential
Information.  “Confidential
Information” means all information, trade secrets, technology and other
materials disclosed or otherwise made available by one party (the “Discloser”) to the other party (the “Recipient”), whether before, on or after
the Effective Date, (i) in a tangible form marked “Confidential”, “Proprietary”
(or with similar legend), (ii) in intangible form or orally and expressed
as being confidential at the time of disclosure and confirmed as being confidential
in a writing delivered to Recipient within thirty (30) days after initial
disclosure, or (iii) under circumstances indicating it is confidential or
proprietary.  Confidential Information
may be owned by a third party, including a Subcontractor or IP Provider.  Neither party will disclose this Agreement
any SOW or their terms, to any third party without the specific, written
consent of the other.  Without limiting
the foregoing, Project Technology shall be deemed Confidential Information of
Customer.  Customer acknowledges that
Project Technology may include Confidential Information of Open-Silicon.

 

10

 

12.2                        Duties
in Respect of Confidential Information.

 

(a)                                  Recipient
agrees not to use Confidential Information or disclose such Confidential
Information except as expressly permitted under this Agreement or as expressly
agreed in writing by the Discloser.  Each
party shall use Confidential Information disclosed to it solely as permitted
under this Agreement.  Subject to the
following, Recipient agrees to not disclose Confidential Information except to
those employees and contractors of Recipient who have agreed to be bound by
confidentiality obligations not less protective than that contained in this
Agreement. Recipient has the right to use and disclose Confidential Information
reasonably in connection with the exercise of its rights or performance of its
obligations under this Agreement, subject to confidentiality obligations no
less protective of such Confidential Information as the terms and conditions
contained in this Agreement.  Recipient
shall exercise the same degree of care to prevent unauthorized use or
disclosure of Confidential Information as it takes to preserve and safeguard
its own confidential information of similar importance, but in any event, no
less than a reasonable degree of care. 
Notwithstanding any other provision of this Agreement or any SOW,
Open-Silicon’s provision to Customer of anything which contains confidential
information or materials of third parties is conditioned on Open-Silicon’s
receipt of documentation showing that such third parties permit Customer to
receive such confidential information or materials.

 

(b)                                  Open-Silicon
agrees not to, directly or indirectly (including, without limitation, through
Subcontractors), [***].  Notwithstanding
the provisions of Section 12.2(b), licensing of software and/or technology
that Open-Silicon makes generally available shall not be deemed a violation of
this provision even if such software and/or technology is used by one of the
enumerated companies or their affiliates in products Similar to the Products.
As used in this Section 12.2(b), “Similar” means identical to,
substantially similar to, or comprising the same form, fit and function as, the
Products.

 

12.3                        Compelled
Disclosure.  If
disclosure of Confidential Information is required by applicable law: (i) the
Parties shall use all legal means available to minimize the disclosure to third
parties of the Confidential Information; (ii) the Recipient compelled to
make disclosure shall inform the Discloser at least ten (10) business days
in advance of the disclosure or, if such notice is impossible, as soon as
possible; and (iii) the Recipient compelled to make disclosure shall make
reasonable efforts to give the Disclosure a reasonable opportunity to review
and comment upon the disclosure, and any request for confidential treatment or
a protective order pertaining thereto, prior to making such disclosure,
provided that it is not impracticable to do so.

 

12.4                        Exceptions.  The Recipient shall be relieved of its duties
in respect of specific Confidential Information to the extent that any such information:
(a) falls into the public domain or becomes publicly known through no
fault of Recipient (or its personnel or Subcontractors); (b) becomes known
to Recipient, without restriction, from a third party through no breach of
trust or an obligation of confidentiality; and/or (c) was independently
developed by Recipient without use of the Confidential Information and by
employees or contractors of Recipient who had no access to any Confidential
Information of Discloser and have not been involved in performance of this
Agreement.  The burden of proof of the
existence of an exception shall be on Recipient. The Parties may disclose this
Agreement and SOWs in confidence to their respective legal counsel,
accountants, bankers, and other similar advisors, and financing sources,
including potential acquirers or merger partners, as necessary in connection
with obtaining services from such third parties or the negotiating of an
acquisition or merger.

 

12.5                        Publicity.  Neither party may use the other party’s name
or trademarks in any type of advertisement materials, web sites, press
releases, interviews, articles, brochures, business cards, project reference or
client listings without the other’s prior written consent except as may be
required by law.

 

11

 

13.                               INTELLECTUAL
PROPERTY OWNERSHIP; LICENSING.

 

13.1                        Ownership
of Pre-Existing Technology.  Other than the rights expressly granted or
assigned in this Section 13, Open-Silicon or its licensors will own and
retain all [***] to the Effective Date, or [***] of performing any Services for
Customer, including, without limitation: [***] and (iii) [***].  Customer or its licensors shall own and
retain all [***], including, without limitation, [***].

 

13.2                        [***].  Customer shall solely and
exclusively own all [***] and Open-Silicon hereby irrevocably assigns, and
agrees to assign, to Customer all right, title and interest, including all
[***], that Open-Silicon may have in and to any [***].  Customer agrees that [***] created or
developed by Open-Silicon hereunder will not be used by Customer to [***] to a
[***] unless and until [***].

 

13.3                        Mask
Ownership. [***] shall own the masks produced in connection with the
performance of this Agreement (including any SOW) and all [***], subject to
[***] of any [***] agrees that such masks shall not be used for any purpose
other than [***] unless otherwise agreed [***] shall destroy such [***] and
certify to [***] thereof.  Effective upon
a [***] hereby (a) [***] and (b) [***].

 

13.4                        Development
License. [***] hereby grants to [***], for the term
of this Agreement, a [***] in the [***] and [***] to [***] the [***] and [***] solely to [***] under the Agreement.

 

13.5                        License
to Customer.  If Open-Silicon incorporates any [***] (including any technology provided by IP
Providers) in any [***], Open-Silicon hereby grants, under any of
Open-Silicon’s [***] therein (including rights licensed to Open-Silicon from IP
Providers), to Customer [***] to (a) [***], and to [***] any products or
services; and (b) [***] such [***].

 

13.6                        No
Implied Licenses.  Except as
expressly set forth in this Agreement or any separate license agreement, the
parties do not, directly or by implication, by estoppel or otherwise, grant to
each other any rights or licenses, and neither party shall have any ownership
rights in any intellectual or tangible property of the other.  Any rights not expressly granted hereunder
are retained by their respective owner(s).

 

14.                               INDEMNIFICATION.

 

14.1                        Indemnification
by Open-Silicon. [***], Open-Silicon will defend or settle any third
party claim, action, suit or proceeding brought against Customer based upon a
claim that the Services or Production Units, alone and not in combination with
any other product or service, constitute a direct infringement of any patent
(in effect as of the Effective Date) or copyright issued under the laws of
[***], and will pay all damages and costs finally awarded against Customer in
connection with such claim. Customer will: (i) promptly notify Open-Silicon
in writing of any such suit or proceeding, (ii) provide Open-Silicon with
sole control over the defense or settlement of any such claim or action; and (iii) provide
reasonable information and assistance in the defense or settlement of any such
claim or action. [***]. Open-Silicon shall obtain Customer’s prior written
consent, which consent shall not be unreasonably withheld, to any settlement of
any third party claim, action, suit or proceeding, except if the settlement is
only for monetary damages and contains a full release of Customer from the
claim.

 

14.2                        Exclusions
from Indemnification by Open-Silicon.   Open-Silicon will not be liable for any
expenses, damages, costs or losses arising out of or resulting from any suit or
proceeding based upon a claim of intellectual property infringement to the
extent arising from: (a) [***], or any [***], or (b) any alleged
[***].

 

12

 

14.3                        Indemnification
by Customer.  [***], Customer
will defend or settle any third party claim, action, suit or proceeding brought
against Open-Silicon based upon a claim of direct infringement of any patent
(in effect as of the Effective Date) or copyright issued under the laws of
[***], arising from: (a) [***], or (b) any [***], and will pay all
damages and costs finally awarded against Open-Silicon in connection with such
claim.  Open-Silicon will: (i) promptly
notify Customer in writing of any such suit or proceeding, (ii) provide
Customer with sole control over the defense or settlement of any such claim or
action; and (iii) provide reasonable information and assistance in the
defense or settlement of any such claim or action. [***].  Customer shall obtain Open-Silicon’s prior
written consent, which consent shall not be unreasonably withheld, to any
settlement of any third party claim, action, suit or proceeding, except if the
settlement is only for monetary damages and contains a full release of
Open-Silicon from the claim. 
Notwithstanding the foregoing, Customer reserves the right (but shall
have no obligation) to cancel the Project giving rise to a third party claim
(or a threat thereof), which may be subject to an indemnity obligation under
this Section 14.3.

 

14.4                        Exclusions
from Indemnification by Customer.  Customer will not be liable for any expenses,
damages, costs or losses to the extent arising out of or resulting from any
suit or proceeding based upon a claim of intellectual property infringement
that (a) [***] and not in combination with any other product or service
constitute [***] (in effect as of the Effective Date) or [***] as such under
the [***].

 

14.5                        Entire
Obligation; Exclusive Remedy.  The foregoing
states the entire obligation and exclusive remedy of each of the parties hereto
with respect to any alleged intellectual property infringement regarding any
Product, Intellectual Property Right, or Service furnished hereunder.

 

15.                               EXPORT.

 

Customer will not export, either directly or indirectly, any
Open-Silicon-furnished Technology or any Product or system incorporating such
Product without first obtaining any required license or other approval from the
Government of the country into which the technology or product is imported (“Host
Government”) or the U.S. Department of Commerce or any other agency or
department of the Host Government or the United States Government.

 

16.                               ELECTRONIC
TRANSACTIONS.

 

16.1                        General.  Subject to the terms and conditions of this Section 16.1,
the parties agree to receive electronic documents and accept electronic
signatures relating to transactions contemplated by this Agreement, including
delivery releases, purchase orders, purchase order acknowledgments, invoices
and other transactions as may be agreed by the parties from time to time.  Electronic documents and electronic
signatures shall be a substitute for paper-based documents and signatures, and
the legal validity of a transaction will not be denied on the ground that it is
not in writing.  This Agreement may not
be amended or terminated by these means.

 

16.2                        Transmission
of Electronic Documents.  All electronic
documents shall be transmitted through the use of EDI, XML or other web-based
transmission formats.  Electronic
documents may be transmitted or received electronically directly by the parties
or through designated third party communication network service providers with
which either party may contract.  Each
party agrees to designate all transmissions as confidential and protect all
electronic documents from improper or unauthorized access in accordance with Section 12
(“Confidentiality and Publicity”). 
Information contained in any electronic document or otherwise exchanged
electronically between the parties shall be considered the confidential
information of the disclosing party and shall be maintained in accordance with Section 12
(“Confidentiality and Publicity”).

 

13

 

16.3                        “Electronic
Signature” Defined.  For purposes of
this Agreement, an electronic signature shall mean information or data in
electronic form that is attached to or logically associated with an electronic
document and executed or adopted with the intent to sign the electronic
document.  An oral communication or a
recording of an oral communication shall not qualify as an electronic
signature.  Nothing in this Section 16.3
shall be construed to limit or otherwise affect the rights of either party to
assert that an electronic signature is a forgery, is used without authority, or
otherwise is invalid for reasons that would invalidate the effect of a
signature in written form.

 

17.                               GOVERNING
LAW.

 

This
Agreement is to be construed and interpreted according to the laws of the State
of Delaware, excluding its conflict of laws provisions that would require the
application of the laws of another state. THE PROVISIONS OF THE UNITED
NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS AND THE UNIFORM COMPUTER
INFORMATION TRANSACTIONS ACT (UCITA) SHALL NOT APPLY TO THIS AGREEMENT.

 

18.                               MISCELLANEOUS.

 

18.1                        Restricted
Use.  Customer acknowledges and
agrees that the Products are not designed, intended, or certified for use in
components of systems intended for, or in relation to the operation of [***],
or for any other application in which the failure of the Product could create a
situation where [***] may occur, and Customer shall not use, sell, or otherwise
distribute the Products for said uses.

 

18.2                        Notices.  Unless otherwise stated herein, written
notices shall be delivered by hand, mail, fax, or email (with contemporaneous
delivery by one of the foregoing means) to the persons and at the addresses as
set forth below (in the case of Open-Silicon), or as set forth on the signature
page of the Agreement (in the case of Customer).  Either party may change its address for
receipt of notice to the other party by delivering written notice of such
change pursuant to this Section 18.2.

 

Open-Silicon, Inc.

490 N. McCarthy Blvd., Suite 220

Milpitas, CA 95035

Attn: Contract Management

 

18.3                        Force Majeure.  Except for the obligation to
pay any amounts when due, neither party will be liable for any failure to
perform acts due to unforeseen circumstances or causes beyond the parties’
reasonable control. If any such circumstances occur, the affected party’s time
for delivery or other performance will be extended for a period equal to the
duration of the delay caused thereby, provided that the party affected by such
circumstances or causes uses commercially reasonable efforts to mitigate the
effect of such delay.  Either party may
terminate this Agreement upon written notice if such circumstances or causes
delay any party’s performance under this Agreement by a period of more than
thirty (30) days.

 

18.4                        Assignment.  This Agreement will be
binding upon and inure to the benefit of the parties hereto and their permitted
successors and assigns.  Notwithstanding
the foregoing, neither this Agreement, nor any rights or obligations hereunder,
may be assigned or otherwise transferred by either party without the prior
written consent of the other party, provided, however, that either party may
assign, without prior written consent all or any of its rights or delegate all
or any of its obligations under this Agreement to a majority owned subsidiary
of such party or to a third party in connection with merger or the sale of all
or substantially all of the assets or business to which this Agreement
relates.  Any other attempted assignment
or transfer without prior written consent will be voidable at the option of the
non-consenting party.

 

14

 

18.5                        Subcontractors. 
Customer acknowledges that in performing the Services Open-Silicon may
use Subcontractors to design, manufacture and/or ship Products without Customer’s
prior approval; provided that Open-Silicon  shall
remain fully responsible and liable for the performance of the Services and its
other obligations under this Agreement, and any act or omission of Open-Silicon’s
Subcontractors (other than Subcontractors designated by Customer in writing)
shall constitute an act or omission of Open-Silicon, and any act or omission by an such Subcontractors (other than
Subcontractors designated by Customer in writing) that would constitute a breach of the terms and conditions of this
Agreement if it were an act or omission by Open-Silicon shall constitute a breach of this Agreement by Open-Silicon.  Notwithstanding the foregoing, in the event
that the SOW identifies a specific Subcontractor to perform certain functions
hereunder or requires that the Subcontractor for certain functions will be mutually
agreed upon by the parties, Open-Silicon may not use another Subcontractor to
perform such functions without obtaining Customer’s prior written approval
therefor.

 

18.6                        Counterparts.  This Agreement may be executed in multiple
counterparts, each of which will be deemed to be an original and all of which
will be deemed a single agreement.

 

18.7                        Construction.  The headings provided in
this Agreement are for convenience only and shall not be used in interpreting
or construing this Agreement.  For
purposes of this Agreement, the term, “including” means “including but not
limited to”.

 

15

 

18.8                        Independent
Contractors.  The parties
hereto are independent contractors. 
Nothing in this Agreement will be construed to make the parties partners
or joint venture or to make either party liable for the obligations, acts, or
activities of the other.

 

18.9                        Third
Party Rights.  The provisions
of this Agreement are intended solely for the benefit of Customer and
Open-Silicon, and shall create no rights or obligations enforceable by any
other party. Notwithstanding the foregoing, to the extent that a third party is
licensed hereunder, such third party is a beneficiary of the provisions hereof
that related to such licensed rights.

 

18.10                 Rights
and Remedies Cumulative.  Except as
provided in Section 10 (“Limited Product Warranty; Disclaimer”), the
parties’ rights and remedies under this Agreement are cumulative.  Each party acknowledges and agrees that an
actual or threatened breach of any of the provisions contained in this
Agreement may result in immediate, irreparable and continuing damage to the
non-breaching party for which there may be no adequate remedy at law, and the
non-breaching party may apply to any court of competent jurisdiction for
specific performance or injunctive relief to enforce or prevent any breach of
the provisions of this Agreement.

 

18.11                 Severability;
Limitations Period.  If any
provision of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, invalid or unenforceable for any reason, then such
provision will be enforced to the maximum extent permissible under the
circumstances so as to effect the intent of the parties and the economic effect
of the Agreement.  Neither the legality,
validity or enforceability of the remaining provisions hereof nor the legality,
validity, or enforceability of the provision at issue in other circumstances
will otherwise be affected or impaired thereby, and the remainder of the
provisions of this Agreement will remain in full force and effect.  The parties will replace any unenforceable
provision with a valid, legal and enforceable provision that most early
achieves the economic effect of the unenforceable provision.  Without limiting the generality of the foregoing,
the parties agree that Section 11 (“Limitation of Liability”) will remain
in effect notwithstanding the illegality, invalidity, unenforceability, or
failure of the essential purpose of any provision in Section 10 (“Limited
Product Warranty; Disclaimer”). 

 

18.12                 Entire
Agreement.  This
Agreement, including the exhibits hereto and each SOW, contains the entire
understanding between Customer and Open-Silicon with respect to the subject
matter hereof and merges and supersedes all prior and contemporaneous
agreements, dealings and negotiations. 
Any modification, alteration, or amendment to this Agreement will not be
effective unless made in writing, dated and signed by duly authorized
representatives of both parties. All rights and remedies, whether conferred
hereunder, or by operation of law, will be cumulative and may be exercised
singularly or concurrently.   Failure by
either party to enforce a term will not be deemed a waiver of future
enforcement of that or any other term. 
The following Exhibits are hereby incorporated herein by this
reference:  Exhibit A
(“Statement of Work”), Exhibit B-1 (“Prototype
Approval Form”), Exhibit B-2 (“Release to
Production Form”), Exhibit C
(“Engineering Change Order Process”), Exhibit D
(“Milestone Acknowledgement Letter”), and Exhibit E (“Die Banking”). In the event of a
conflict between the terms of this Agreement and any exhibit, the terms of this
Agreement will govern.  In the event of a
conflict between Exhibit A and a change order
executed by parties, the change order  will govern.

 

16

 

IN WITNESS WHEREOF, the parties have caused
their duly authorized representatives to enter into this Agreement, effective
as of the Effective Date.

 

	
  OPEN-SILICON, INC.

  	
   

  	
  NETLIST, INC.

  
	
  (“OPEN-SILICON”)

  	
   

  	
  (“CUSTOMER”)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Print
  Name:

  	
   

  	
   

  	
  Print
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
									

 

17

 

EXHIBIT A

OPEN-SILICON, INC.

[***]

 

18

 

EXHIBIT B-1

OPEN-SILICON, INC.

PROTOTYPE APPROVAL

 

	
  Customer:

  	
   

  
	
  Address:

  	
   

  
	
   

  	
   

  
	
  Customer Agreement Number/Date (incorporated by reference):

  	
   

  

 

	
  Customer Part Number:

  
	
  Project Code Name:

  

 

We have completed our evaluation of the prototypes
for the above-referenced part.  The part
meets our requirements, and the part complies with the test vectors to which we
mutually agreed.

 

We formally approve the prototypes for the
above-referenced part.

 

Approval:

	
  ACKNOWLEDGED
  AND AGREED:

  	
   

  
	
  (Print
  or Type Customer Name)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  (Signature)

  
	
   

  	
   

  	
   

  
	
  Print
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  
					

 

19

 

EXHIBIT B-2

OPEN-SILICON, INC.

RELEASE TO PRODUCTION

 

	
  Customer:

  
	
  Address:

  
	
   

  
	
  Customer Agreement Number/Date (incorporated by reference):

  

 

	
  Customer Part Number:

  
	
  Project Code Name:

  

 

We formally request that the part be released to
production.

 

Approval:

ACKNOWLEDGED AND AGREED:

(Print or Type Customer Name)

 

 

	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  (Signature)

  
	
   

  	
   

  	
   

  
	
  Print
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  
					

 

20

 

 

EXHIBIT C

OPEN-SILICON, INC.

ENGINEERING CHANGE ORDER PROCESS

 

PURPOSE

 

To describe method to be used in accepting
Engineering Change Orders from Customers

 

SCOPE

 

This procedure applies to all designs that are in
active execution phase.

 

PROCESS OWNER

 

The process is owned by the ASIC Program Manager
(APM).   The release and any subsequent
changes to this procedure must have the approvals of the Director of APM and
Engineering.

 

APPLICABLE / REFERENCE
DOCUMENTS

 

1.1                         OS-0027, List
of Customer ECOs

 

DEFINITIONS

 

	
  Customer:

  	
  That with whom a Statement of Work has been
  signed.

  
	
  Project:

  	
  Work to be performed by Open-Silicon for such a
  customer

  

 

GENERAL POLICY PROCEDURE

 

ECO Description

 

Scope of work to be performed by Open-Silicon is
dictated by the Statement of Work document signed between Open-Silicon
representative and Customer. Any change to this scope of work which could
result in change in effort and cost shall be deemed as an Engineering Change
Order (ECO) from the customer. Such additional tasks shall only be undertaken
by Open-Silicon after customer has submitted a signed ECO Form provided by
Open-Silicon.

 

ECO Types

 

ECOs can be filed for a variety of reasons. Some of
the most common reasons for filing an ECO are listed below:

 

·                                          Customer may want to change
the scope of work being performed. For example, a customer may decide to retain
Open-Silicon to undertake Part Qualification which may not be included in
the current SOW.

·                                          Customer may decide to
change the package of the device.

·                                          Customer may have a need to
change the IP being used in the design.

·                                          Customer may
want to move out the schedule due to their internal project delays.

·                                          Customer may
want to change the architecture of their device. This includes changes to
device interfaces

·                                          Customer may want
to change the design center and/or design team working on the design

 

ECO parameters

 

All ECOs must be measurable. The ECO form shall have
the following measurable parameters (among other parameters):

 

·                                          Number of lines of code
changed

 

21

 

·                                          Number of gates modified

·                                          Number of nets touched

·                                          Number of memory elements
(including registers) impacted

·                                          Levels of Netlist hierarchy
traversed for the ECO

·                                          Time to implement changes

·                                          Cost in dollars to implement
and verify

·                                          Impact to schedule to
implement

·                                          List of IPs whose
performance/characterization could be impacted

·                                          Die size impact to implement

·                                          Impact to package size and
performance

·                                          Expected design performance
impact to implement

·                                          ECO approval

 

ECO Forms shall be approved by Engineering and APM
office for execution. APM shall update schedule based on ECO impact and publish
new date as POR to all.

 

Standard ECO Form

 

	
  Project
  Name:

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  
	
  ECO
  Number:

  	
   

  	
   

  

 

ECO Description

 

22

 

Table 1: Type of ECO

 

	
  Type

  	
   

  	
  Description

  	
   

  	
  Items Impacted

  
	
  Change
  in scope of work

  	
   

  	
   

  	
   

  	
  {SOW,
  Ts&Cs, Cost, etc.}

  
	
  Change
  in design center

  	
   

  	
   

  	
   

  	
  {Schedule,
  Cost, etc.}

  
	
  Change
  in design team

  	
   

  	
   

  	
   

  	
  {Schedule,
  Cost, etc.}

  
	
  Change
  in design schedule

  	
   

  	
   

  	
   

  	
  {Schedule,
  Cost, etc.}

  
	
  Change
  in IP agreements

  	
   

  	
   

  	
   

  	
  {SOW,
  Schedule, Cost, Ts&Cs, etc.}

  
	
  Change
  in design architecture

  	
   

  	
   

  	
   

  	
  {SOW,
  Schedule, Cost, etc.}

  
	
  Change
  in package

  	
   

  	
   

  	
   

  	
  {SOW,
  Schedule, Cost, etc.}

  

 

23

 

Table 2: Design Change Details

 

	
  Object

  	
   

  	
  Details

  	
   

  	
  Items Impacted

  
	
  Additional
  Tasks being requested

  	
   

  	
   

  	
   

  	
  {Characterization,
  Qual, SHL, etc.}

  
	
  Lines
  of Code modified

  	
   

  	
   

  	
   

  	
  {rtl,
  tests, test-benches, scripts etc.}

  
	
  Gates
  modified/added/removed

  	
   

  	
   

  	
   

  	
  {netlists,
  modules, verification scripts, etc.}

  
	
  Nets
  touched

  	
   

  	
   

  	
   

  	
  {netlists,
  modules, verification scripts, etc.}

  
	
  Memory Elements (including registers)
  modified/added/removed

  	
   

  	
   

  	
   

  	
  {netlists,
  modules, verification scripts, etc.}

  
	
  Levels
  of netlist hierarchy traversed

  	
   

  	
   

  	
   

  	
  {netlists,
  modules, verification scripts, etc.}

  
	
  IPs whose performance/characterization could be
  impacted

  	
   

  	
   

  	
   

  	
  {instance names, modes in which impact is
  observed, netlist}

  
	
  Design
  performance impact

  	
   

  	
   

  	
   

  	
  {timing,
  area, power, IR drop, EM etc.}

  

 

Table 3: Design ECO related Tasks

 

	
  Task

  	
   

  	
  Owner

  	
   

  	
  Completed

  	
   

  	
  Comments

  
	
  Modified
  RTL Functionally Verified

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  RTL
  to Netlist Formally Verified

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Modified
  design checked for performance deviation

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Verified
  impact of modified design on IP

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Verified
  impact of modified design on die size

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Verified
  impact of modified design on package

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

24

 

Table 4: Cost of ECO

 

	
  Function

  	
   

  	
  Cost

  	
   

  	
  Comments

  
	
  Man
  Days required to Implement the ECO

  	
   

  	
   

  	
   

  	
   

  
	
  Monetary
  Impact to existing agreement

  	
   

  	
   

  	
   

  	
   

  
	
  Schedule
  Impact

  	
   

  	
   

  	
   

  	
   

  

 

This
ECO is being approved for execution by the following representatives of
Open-Silicon and its Customer:

 

	
  OPEN-SILICON, INC.

  	
   

  	
   

  
	
  (“OPEN-SILICON”)

  	
   

  	
  (“CUSTOMER”)

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Print Name:

  	
   

  	
   

  	
  Print
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  

 

25

 

EXHIBIT D

MILESTONE ACKNOWLEDGEMENT LETTER

 

[[CUSTOMER LETTERHEAD]]

 

Chief
Financial Officer

Open-Silicon, Inc.

490
N. McCarthy Blvd., Suite 220

Milpitas,
CA 95035

 

Dear
Sir or Madam:

 

We
acknowledge completion of milestone XX and all prior milestones.

 

Sincerely,

 

 

	
  /s/

  	
   

  
	
   

  	
   

  
	
  Officer
  of Customer

  	
   

  

 

26

 

Exhibit E

(“Die Banking”)

 

Open-Silicon
will build and hold Product in a die bank for Customer under the following
additional terms and conditions:

 

1.               Open-Silicon will hold
Products in a die bank in a quantity equal to the greater of (a) the then-current
Forecast, and (b) the cumulative volume of wafers ordered that are
produced into Production Units in the preceding three (3) months.

 

2.               Customer will pay
Open-Silicon for wafers to be held in die bank (but not delivered to Customer),
and for the completion of production of die bank wafers (for delivery to
Customer) according to the table set forth below:

 

	
   

  	
   

  	
  Per wafer deposited to die bank

  	
   

  	
  Per Production Unit from die banked wafer

  
	
   

  	
   

  	
  1/2
  of part price as specified in SOW or any subsequent amendment that modifies
  the part price stated therein times the number of expected yielded parts from
  such deposited wafers

  	
   

  	
  1/2
  of part price as specified in SOW or any subsequent amendment that modifies
  the part price stated therein; when all die banked wafers from a deposit have
  been built out and shipped, any difference between the amounts invoiced and
  the value of the part price times Production Units shipped shall be either
  invoiced, or (if the invoices are in excess of such value) refunded.

  

 

3.               Open-Silicon will invoice
Customer for die banked material at the time such material is deposited into
die bank, and for the completion of production of die bank wafers at the same
time that Production Units would be invoiced under the Agreement.

 

4.               [***].

 

5.               After completion, Production
Units made from die banked material are not treated differently under the
Agreement.

 

6.               No material shall remain in
die bank longer than [***] without the parties’ express agreement.  In the event that the parties make such
agreement, Customer acknowledges that [***] and extended warranty [***].

 

7.               Die bank inventory shall be
handled on [***] basis, and to facilitate this Open-Silicon may complete
production of any and all wafers in die bank to fulfill any Purchase Order for
Production Units and deposit any and all newly-fabricated wafers in die bank.

 

8.               Purchase Orders specifically
for die bank material [***].

 

27Exhibit 10.3

 

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

 

Register
ASIC

 

2.             Summary

 

This
DPA is for the development of Register 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:

None

 

8.             Price

 

	
  First

  	
   

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

  	
   

  	
  *[***]

  
	
  Next

  	
   

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

  	
   

  	
   

  
	
  Next

  	
   

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

  	
   

  	
   

  
	
  After
  first

  	
   

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

  	
   

  	
   

  

 

*Prices
for 01Mpcs represent an addition of US$[***] per unit
in amortized Total NRE cost.  See Section 10.

 

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$[***]

  
	
  Amortized
  NRE:*

  	
   

  	
  US$[***]

  

 

*  TAEC agrees to charge and Customer agrees to
pay US$[***] in NRE amortized over the first [***] production units, at the additional price of US$[***]  per piece (see Section 8).  In the even t that Customer has not paid the
total owed sum of US$[***] through
the amortized sales process within [***] months of
the date of [***], then Customer agrees 

 

 

to
pay the entire balance owing upon invoice by TAEC.  For the avoidance of doubt, Amortized NRE is
considered part of NRE for all purposes including Sections 9 and 10 of the
attached SLI Terms and Conditions.

 

·      [***] 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 [***] 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 [***]
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
  P. Perrott, SVP Sales & Marketing

  
	
  Takeshi
  Iwamoto VP, Customer SoC & 

  	
   

  	
  Printed
  Name and Title

  
	
  Foundry
  Business Unit, System LSI

  	
   

  	
   

  
	
  Printed
  Name and Title

  	
   

  	
   8/15/08

  
	
   

  	
   

  	
  Date

  
	
  8/22/08

  	
   

  	
   

  
	
  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 its [***] 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.

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