NAND Flash Supply Agreement Between Micron and Apple

Exhibit 10.161

 

[***] DENOTES CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITHTHE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR

 

NAND Flash Supply Agreement

Between Micron and Apple

 

This NAND Flash Supply Agreement (the “Agreement”) is entered into by andbetween Apple, a California corporation doing business at 1 Infinite Loop,Cupertino, California (“Apple”),and Micron Technology, Inc., a Delaware corporation, doing business at 8000 S.Federal Way, P.O. Box 6, Boise, Idaho 83707 (“Micron”)as of the Effective Date (as defined below). Apple and Micron are sometimesindividually referred to as a “Party” andcollectively as the “Parties”.

 

Purpose

 

Apple is entering into this Agreement to enable it to have a long termsupply of NAND flash products from Micron, and Micron is entering into thisAgreement to enable it to supply on a long term basis NAND flash products toApple. This Agreement sets forth the terms and conditions on which Micron willsupply to Apple, and Apple will purchase from Micron, NANDflash products.

 

Agreement

 

In consideration of the mutual promises and covenants set forth herein,the Parties agree as follows:

 

1.             Venture

 

1.1                                 On or before October31, 2005, Micron intends to execute an agreement with Intel Corporation, aDelaware corporation (“Intel”), toform a Delaware limited liability company (the “Manufacturer”)to manufacture NAND flash products. Intel and Micron will be the only membersof the Manufacturer. Micron will be a 51% owner of the Manufacturer and 51% ofthe Manufacturer’s wafer starts will be for NAND flash products sold to Micron.

 

1.2                                 The chief executiveofficer of Micron will recommend to the Board of Directors of Micron that theformation of the Manufacturer be approved by the Board of Directors on orbefore October 31, 2005.

 

2.                                      Term

 

2.1                                 Sections 1, 2.2, 9, 11through 18 and this Section 2.1 of this Agreement will take effect when theAgreement is executed by Micron and Apple.

 

2.2                                 The remainingprovisions of this Agreement will not take effect unless and until the closingof the transaction to form the Manufacturer occurs (the “EffectiveDate”). If the closing of the transaction to form theManufacturer does not occur before [***], the Parties agree to amend Exhibit Awith respect to the Supply Commitment

 



 

for each calendar quarter to reflect the delay between the date of thebeginning of the Supply Commitment specified in Exhibit A and the actualclosing date of such transaction on a day for day basis. If the closing of thetransaction to form the Manufacturer does not occur by [***], Apple may electnot to enter into the provisions of this Agreement that are not effective underSection 2.1 by providing written notice to Micron by [***]. If the closing ofthe transaction to form the Manufacturer does not occur by [***], Micron mayelect not to enter into the provisions of this Agreement that are not effectiveunder Section 2.1 by providing written notice to Apple by [***]. In the eventthat the closing of the transaction to form the Manufacturer does not occur by[***], then the provisions of the Agreement that are not effective underSection 2.1 shall not take effect and this Agreement shall terminate. If theremaining provisions of this Agreement become effective as provided in thisSection 2.2, this Agreement will expire on December 31, 2010, unless terminatedsooner in accordance with Sections 2.3 or 2.4 below or by written agreement ofthe Parties.

 

2.3                                 Apple may terminatethis Agreement if: (i) Micron materially breaches this Agreement and fails tocure such breach within 30 days after receipt of written notice from Apple; or(ii) Micron or the Manufacturer files or has filed against it a petition inbankruptcy, has a receiver appointed to handle its assets or affairs, or makesor attempts to make an assignment for the benefit of creditors, or is dissolved(other than in connection with the acquisition of all of the capital stock orsubstantially all of the assets of Micron).

 

2.4                                 Micron may terminatethis Agreement if: (i) Apple materially breaches this Agreement and fails tocure such breach within 30 days after receipt of written notice from Micron; or(ii) Apple files or has filed against it a petition in bankruptcy, has areceiver appointed to handle its assets or affairs, or makes or attempts tomake an assignment for the benefit of creditors, or is dissolved (other than inconnection with the acquisition of all of the capital stock or substantiallyall of the assets of Apple).

 

2.5                                 The last sentence ofSection 3.3, and Sections 3.6, 7.3, 9, and 11 through 18 of this Agreementshall survive termination or expiration of this Agreement. Section 3.4 willsurvive with respect to the last calendar quarter of the term of the Agreementuntil the calculation is made with respect to such quarter and Section 10 willsurvive for a period of two (2) years after the termination or expiration date.

 

3.             Supply Commitment byMicron

 

3.1                                 Micron agrees tosupply to Apple the number of gigabytes (“GBs”)identified in Exhibit A as the supply commitment for each calendar quarter (asmay be adjusted under Sections 2 or 3 of Exhibit A), (the “SupplyCommitment”). Micron will accept and fulfill all P.O.s (asdefined in Section 5.4) for Micron Products (as defined in Exhibit D) placed byApple in accordance with Section 5.4, except to the extent the total GBsordered for delivery in a calendar quarter exceeds the Supply Commitment forthat calendar quarter. At least [***] ([***]) days prior to each calendarquarter,

 

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Micron will provide to Apple written notice of (i) the total number ofGBs that Micron will make available for sale to Apple during such quarter and(ii) the number of GBs of each gigabit die density available for use in suchMicron Products during such quarter, consistent with the Density Road Map (asdefined in Section 8.1).

 

3.2                                 (a)  If Micron reasonably believes it will beunable to meet the Supply Commitment in any calendar quarter during the term ofthis Agreement, Micron will immediately notify Apple in writing of suchshortage and the GBs it will be able to supply to Apple if Micron takes theactions set forth in Section 3.2(c) below.

 

(b)  Within [***] ([***]) business days afterreceipt of such notification issued under Section 3.2(a), Apple may [***].

 

(c)  If Apple [***], Micron will, to the extentnecessary to meet such P.O.s: (i) direct the Manufacturer to use Micron’sallocation of wafer starts, work in process (if possible), and the resultingoutput from such wafer starts to manufacture Micron Products; and (ii) makeavailable for sale to Apple finished Micron Products delivered to Micron orheld by the Manufacturer for Micron for such quarter, and any Micron Productsmanufactured for Micron inprevious quarters for later delivery to Apple, up to [***].

 

3.3                                 If in any calendarquarter Micron did not meet at least [***]% of the Supply Commitment for suchcalendar quarter for any reason, and:

 

(a) Micronprovided notice under Section 3.2(a) and Apple reconfirmed existing P.O.sand/or placed additional P.O.s for Micron Product, as required by Section3.2(b), that Micron was unable to fulfill in such quarter; or

 

(b) Micronprovided notice under Section 3.2(a), Apple reconfirmed existing P.O.s and/orplaced additional P.O.s for Micron Product, as required by Section 3.2(b), andApple provided written notice representing that it would have placed P.O.s upto the Supply Commitment but did not due to the notification it received fromMicron under Section 3.2(a); or

 

(c) Micron didnot provide notice under Section 3.2(a),

 

then Micronwill promptly reimburse the portion of the Pre-Payment equal to the sum of:

 

(i)             to the extent Apple is able to purchaseNAND flash products [***], the difference between (x) [***] which it [***], inaccordance with Section 5.4, for delivery during such quarter (and to theextent [***]) and (y) [***]; and

 

(ii)          to the extent Apple is able to purchase NANDflash products [***], the difference between (x) [***], in accordance withSection 5.4, during such quarter (as identified in the notice provided byApple under Section 3.3(b) above), and (y) [***]; and

 

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(iii)       to the extent (x) Apple is unable to purchaseNAND flash products [***], (y) Apple provides Micron written noticerepresenting that it actively contacted its other suppliers and other thirdparty suppliers of NAND flash products to replace the Micron Products Appleplaced P.O.s for, in accordance with Section 5.4, for delivery during suchquarter that Micron was unable to fulfill during such quarter (or would haveplaced P.O.s for, pursuant to Section 5.4, for delivery during such quarter asidentified in the notice provided by Apple under Section 3.3(b) above), butNAND flash products were not available for sale from such suppliers, and (z)[***]; and

 

(iv)      the product of (x) [***] GB and (y) $[***] USD. Forpurposes of this Section 3.3(iv), “Shortfall”shall mean the difference between the Supply Commitment for such quarter andthe number of GBs of Micron Products purchased by Apple during such quarter.

 

Notwithstanding anything herein to the contrary, in the event Micronhas paid to Apple all amounts of the Pre-Payment (either as a reimbursementunder Section 3 of this Agreement or under Section 2 or 3 of Exhibit A, or asapplied against Apple purchases under Section 7.2), Micron shall have nofurther liability under this Section 3.3.

 

3.4                                 If in any calendarquarter Micron failed to meet the Supply Commitment for such quarter, but (A)had GBs available which could have been supplied to Apple [***] (unlessotherwise permitted under additional purchase terms and conditions specificallyreferencing this Agreement and signed by authorized representatives of bothparties) or (B) [***] (unless otherwise permitted under additional purchaseterms and conditions specifically referencing this Agreement and signed byauthorized representatives of both parties), and if (i) the actual percentageof GBs that Micron [***] to Apple was less than [***]% if such calendar quarterwas in [***], [***]% if in [***], or [***]% if in [***], of Micron’s total GBoutput from the Manufacturer for such quarter; (ii) the then current SupplyCommitment is greater than [***]% of the original Supply Commitment set forthin Exhibit A, and (iii) Apple has placed P.O.s in accordance with Section 5.4for Micron Products [***] pursuant to Section 3.1 (not to exceed theSupply Commitment) and such P.O.s have not been cancelled during the calendarquarter or re-scheduled for delivery after the calendar quarter by Apple forany reason other than failure to meet the conditions in Section 4.2 (such anoccurrence referred to as a “Willful Failure to Supply”),then Micron will promptly:

 

(a) pay Apple [***] above; provided, however, that if the WillfulFailure to Supply occurs in a calendar quarter immediately after a calendarquarter in which Apple did not meet the conditions set forth in Section3.4(iii) above, the [***] shall be as follows:

 

(i) in the event that [***].

 

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(ii) in the event that it is determined under Section 3.4(a)(i) [***]then nevertheless Micron [***] under this Section 3.4 if the number of GB ofMicron Products purchased by Apple during the quarter in which the WillfulFailure to Supply occurs is greater than an amount equal to (“[***]”):  (1) the product of: [***] and (B) the SupplyCommitment for the quarter in which the Willful Failure to Supply occurs; or (2)if there was a calculation under clause (1) immediately above in the priorquarter, the product of [***], the Supply Commitment for the most recentcalendar quarter in which the Willful Failure to Supply occurs and [***],provided such product does not exceed the Supply Commitment for that quarter;or (3) if there was a calculation under clause (2) immediately above in theprior quarter, the product of the [***], the Supply Commitment for the mostrecent calendar quarter in which the Willful Failure to Supply occurs and[***], provided such product does not exceed the Supply Commitment for thatquarter. [***].

 

(iii) in the event that it is determined under Section 3.4(a)(i) or(ii) [***] then the volume of GB subject to [***] shall be equal to thedifference between (A) the lesser of (X) [***] and (Y) the number of GB ofMicron Products which Apple placed P.O.s for Micron Products in accordance withSection 5.4 to be delivered during such quarter and (B) the number of GB ofMicron Products which Apple purchased during such quarter (the “[***]”), Micronshall pay to Apple [***] under this Section 3.4 an amount equal to, [***], thedifference between (1) [***] and (2) [***]. In each consecutive quarterthereafter in which a Willful Failure to Supply occurs, the volume of GBssubject to [***] shall be the product of [***], the Supply Commitment for themost recent calendar quarter in which the Willful Failure to Supply occurs and[***], but in no event shall the volume of GB subject to the [***] in any givenquarter exceed the Supply Commitment for that quarter.

 

(b) if the aggregate amount to be paid by Micron inaccordance with subsection (a) exceeds a lifetime cap of [***] US Dollars($[***] USD) [***]”),then, in addition to the amount of such cap, Micron shall reimburse Apple allof remaining Pre-Payment as of the date the cap is exceeded.

 

(c) the Parties agree that the [***] plus the reimbursement of theremaining Pre-Payment as of the date the [***] is exceeded, shall be the soleand exclusive remedy available to Apple under this Section 3.4. Nothingprovided in this Section 3.4 will affect Micron’s obligations with respect tothe Supply Commitment for any calendar quarter.

 

3.5                                 Micron is notobligated to sell any Micron Products in excess of the Supply Commitment toApple either on an annual or a quarterly basis under the terms and conditionsof this Agreement. Further, nothing in this Section 3 adjusts the SupplyCommitment.

 

3.6                                 The Parties agree[***].

 

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4.             Purchase Commitmentby Apple

 

4.1                                 Subject to Section 4.2and 5.4 below, Apple agrees to purchase from Micron in each calendar quarter the[***] (as defined below) for such calendar quarter determined in accordancewith [***] (the “Purchase Commitment”);provided that the total amount in GBs of the highest density of NAND flash diecontained in the Micron Products ordered pursuant to a P.O. for Micron Products(when aggregated with the other P.O.s for such Micron Products for delivery insuch quarter) placed in accordance with Section 5.4 does not exceed the productof (i) the percentage set forth in the Density Roadmap for such die densityduring such quarter; and (ii) the Supply Commitment for such quarter. “[***]”means the [***] of (i) [***] by Apple [***] during the [***]; and (ii) [***] byApple, or [***], from [***], during the [***], for [***]. For the last twoquarters of 2007, and for the years 2008, 2009 and 2010, NAND flash productssupplied by third parties will be included when calculating [***] only ifequivalent NAND flash products are available for sale from Micron, and the conditions set forth inSection 4.2 below are met with respect to such NAND flash products.

 

4.2                                 Micron’s [***] and Apple’s obligation tomeet its Purchase Commitment for a particular quarter are expressly conditionedupon:  (i) availability of Micron Productsthat are qualified for use in Apple Products; provided that Apple does notunreasonably withhold qualification; (ii) such Micron Products being availablefor delivery in time to meet the delivery date requested in accordance with theP.O. and forecast procedures; and (iii) conformance of such Micron Productswith mutually agreed upon specifications and quality requirements.

 

If an Micron Product fails to meet applicable qualificationrequirements after being qualified by Apple, Apple will have no obligation topurchase such Micron Product from Micron unless and until Apple hasre-qualified such Micron Product for use in Apple Products, provided that Appledoes not unreasonably withhold such re-qualification. Apple will include MicronProducts in Apple’s component qualification process with NAND flash productsprovided by other suppliers, provided that the Micron Products meet Apple’sminimum requirements for inclusion in such process and that samples areprovided on a timely basis. During the QTM’s (as defined in Section 8.3 below)the Parties will discuss the schedule and the timing needed to get samples ofMicron Products into Apple’s qualification process.

 

5.             Forecast and PurchaseOrders

 

5.1                                 Each[***], Apple will provide Micron with a [***] rolling forecast of its demandfor Micron Products (the “[***]”). The [***] Forecast will be prepared in good faith andreflect Apple’s best estimate of its demand for Micron Products. Each [***]Forecast will show volume and density requirements for the first [***] of suchForecast by week and for the second through [***] by month. [***] Forecastswill be delivered no later than November 30, February 28, May 30, and August 30of each year for the

 

6



 

[***] commencingon the first, second, third and fourth calendar [***], respectively; provided,however, that the first [***] Forecast will be delivered upon payment of theInitial Pre-Payment under Section 7.1 for the subsequent [***]. Micron willrespond with a statement of supply availability for the [***] covered by such[***] Forecast within [***] ([***]) business days of receipt of the [***]Forecast. The supply availability will be prepared in good faith and reflectMicron’s best estimate of its ability to supply Micron Products during suchperiod.

 

5.2                                 Onor before [***], Apple will give Micron a forecast for Apple’s demand forMicron Products, including volume and density, for the upcoming [***] (the “[***] Forecasts”). The [***] Forecastswill include forecasts for current and future Micron Products.

 

5.3                                 Therolling [***] Forecast and the [***] Forecast provided by Apple are forplanning purposes only and do not constitute an obligation to purchase.

 

5.4                                 Micronwill accept all purchase orders and, in the case of blanket purchase orders,subsequent shipping orders (“P.O.s”),submitted by Apple for Micron Products within the Supply Commitment, exceptthat (i) if the total GBs of Micron Product in any P.O. for a quarter wouldexceed the Supply Commitment for such quarter, Micron shall not be obligated toaccept such P.O. for such excess Micron Product;  (ii) Micron shall not be obligated to acceptany P.O. to the extent such P.O. would cause the amount of Micron Products to bedelivered to Apple in the [***] or [***] month of a calendar quarter,respectively, to exceed [***] percent ([***]%) of the Supply Commitment forsuch quarter; and (iii) Micron shall not be obligated to accept any P.O. in anycalendar quarter to the extent that the total GBs of the highest density ofNAND flash die contained in the Micron Products ordered pursuant to a P.O. for

 

MicronProducts (when aggregated with the other P.O.s for such Micron Products fordelivery during such quarter) placed in accordance with this Section 5.4exceeds the product of (i) the percentage set forth in the Density Roadmap forsuch die density during such quarter; and (ii) the Supply Commitment for suchquarter. Micron will drop ship Micron Products to any location designated byApple in a P.O. provided that Apple provides Micron with reasonable advancenotice of a request to drop ship to a location Micron has not previouslyshipped to under this Agreement. Apple will issue P.O.s for Micron Products noless than [***] ([***]) days prior to shipment, unless the Parties agree inwriting to a different time period. [***].

 

6.                                      Pricing

 

6.1                                 Subject to Section 2.1of Exhibit B, the price at which Micron will offer and sell Micron Products toApple for incorporation into Apple Products under this Agreement will be as setforth in Exhibit B. [***].

 

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7.             Pre-Payment

 

7.1                                 Apple will pay MicronTwo Hundred Fifty Million U.S. Dollars ($250,000,000 USD) (the “Initial Pre-Payment”): (i) on January 10, 2006 if the closing of the transaction to form theManufacturer occurs before January 1, 2006; or (ii) if the closing of thetransaction to form the Manufacturer occurs on or after January 1, 2006, withinten days after the closing of such transaction. If the Initial Pre-Payment is nottimely paid, Micron may terminate this Agreement effective five (5) days afterwritten notice to Apple. The Initial Pre-Payment, together with any additionalamounts paid by Apple to Micron as additions to the Initial Pre-Payment underExhibit A shall be referred to herein as the “Pre-Payment”.Micron shall be entitled to any interest earned on the Pre-Payment once paid byApple.

 

7.2                                 Beginning on [***],the Pre-Payment will be applied by Micron on a dollar for dollar basis forthose purchases of Micron Products by Apple, during a calendar year beginningwith the first dollar of such purchases until such purchases equals [***]% ofthe Pre-Payment (the “Annual Credit Amount”).In the event Apple does not purchase Micron Products equal in value to theAnnual Credit Amount during such calendar year, any remaining portion thereofwill be added to the Annual Credit Amount for the next calendar year.

 

7.3                                 If any portion of thePre-Payment is remaining and has not otherwise been reimbursed on the earlierof December 31, 2010 and the termination of this Agreement, Micron will payApple the remaining portion of the Pre-Payment within 30 days after such date.

 

8.                      MicronProducts and Apple Products

 

8.1                                 This Agreement,including the pricing of Micron Product as set forth in Section 6, shall applyto Micron Products purchased by Apple for use in Apple Products. MicronProducts and Apple Products are defined in Exhibit D.

 

8.2                                 Any products orderedor purchased by Apple from Micron that are not Micron Products are not subjectto the terms and conditions of this Agreement.

 

8.3                                 At least once percalendar quarter Apple’s CTO group and Micron’s CTO group will hold a technicalmeeting (“QTM”) to discuss Apple’sfuture requirements, and Micron’s future supply outlook, including, withoutlimitation, any proposed changes to the Density Road Map.

 

9.                                      Non-Disclosure

 

9.1                                 The Parties willmaintain the confidentiality of the existence of this Agreement, the terms andconditions thereof, and information exchanged in connection with the Agreementin accordance with the terms of the confidential non-disclosure agreemententered into between Apple and Micron dated March 9, 1999, as amended.

 

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9.2                                 Micronand Apple agree that there shall be no public statements or releases regardingthe proposed transaction, except as in the judgment of counsel is required bylaw to be made or as mutually agreed by the Parties.

 

9.3                                 If it is determinedthat disclosure is required by law, the person making such disclosure willnotify the other Party in advance of any such disclosure, will coordinate withthe others with respect to the content of such disclosure and will discloseonly such information as is legally required to be disclosed in the opinion oflegal counsel for the disclosing Party.

 

9.4                                 Subject to theforegoing, the Parties to this Agreement will cooperate with each other tocoordinate all such public statements and releases to be made with respect tothe purchase & supply transactions contemplated hereby.

 

10.          Audit

 

Either Apple or Micron may appoint an independent auditor reasonablyacceptable to the other party to review the other party’s records no more thanonce in any calendar year (unless the results of an audit disclose materialirregularities, in which case, the auditing party may conduct quarterly auditsfor the next three quarters) to confirm that the other party has satisfied itsobligations under this Agreement with regard to price and quantity commitments.The audited party will ensure that an employee who is knowledgeable withrelevant records and business practices is available to facilitate any auditand will cooperate with the auditor’s reasonable requests. The requesting partywill pay for any audit unless the audit discloses that the other partymaterially breached such an obligation under this Agreement, in which case theother party will pay for the audit. Micron representsthat, as of the consummation of the transaction between Micron and Intelregarding the formation of the Manufacturer, Micron willhave the right to audit the Manufacturer to confirm that the Manufacturer hasprovided the percentage of products produced by the Manufacturer to Micron as set forth in Section 1.1 and, asapplicable, has complied with Micron’s direction to take the actions set forthin Section 3.2(c). Upon Apple’s request, Micron willexercise such audit rights and make available the results of such audit toApple.

 

11.          Assignments

 

The Agreement shall be binding upon, and inure to the benefit of, thesuccessors, representatives, and administrators of the parties. Neither partymay assign this Agreement without the other party’s prior written consentexcept to an acquiring party in connection with (i) the sale of a majority ofthe capital stock or all or substantially all of the assets of such party or(ii) the sale of all or substantially all of its assets related to thisAgreement, in the case of Apple or Micron, or of its interest in theManufacturer, in the case of Micron, by way of merger or acquisition providedsuch assignee assumes such party’s rights and obligations under this Agreement;provided, however, that:

 

(i)                                     [***];

 

(ii)                                  Applemay terminate this Agreement [***] effective immediately upon written notice ifMicron assigns this Agreement to [***]; and

 

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(iii)                               Micronmay terminate this Agreement [***] effective immediately upon written notice ifApple assigns this Agreement to [***].

 

In each case, such party shall exercise itsright to terminate under this Section 11 within [***] after such assignment. Inthe event consent is required above, any purported assignment without therequired written consent shall be void and of no effect.

 

(iv)                              Micron may not divest any portion of itsownership interest in the Manufacturer, or its rights in the wafer starts ofthe Manufacturer (51%, as of the Effective Date), to any third party other thanIntel without Apple’s prior written consent except in connection with atransaction described above.

 

12.          Other Terms andConditions

 

This Agreement and the Micron Products purchased hereunder are subjectto any additional purchase terms and conditions agreed to in a writtenagreement specifically referencing this Agreement and signed by authorizedrepresentatives of both parties, which are incorporated herein by reference.

 

13.          Governing Law

 

The Agreement and the rights and obligations of the parties will begoverned by and construed and enforced in accordance with the laws of the Stateof California as applied to agreements entered into and to be performedentirely within California between California residents, without regard toconflicts of law principles. The parties expressly agree that the provisions ofthe United Nations Convention on Contracts for the International Sale of Goodswill not apply to the Agreement or to their relationship.

 

14.          Dispute Resolution, Jurisdiction andVenue

 

If there is a dispute between the parties (whether or not the disputearises out of or relates to the Agreement), the parties agree that they willfirst attempt to resolve the dispute through one senior management member ofeach party.  If they are unable to do so within 60 days after thecomplaining party’s written notice to the other party, the parties will thenseek to resolve the dispute through non-binding mediation conducted in SantaClara County or San Francisco County, California.  Each party must bearits own expenses in connection with the mediation and must share equally thefees and expenses of the mediator.  If the parties are unable to resolvethe dispute within 60 days after commencing mediation, either party maycommence litigation in the state or federal courts in Santa Clara County,California. The parties irrevocably submit to the exclusive jurisdiction ofthose courts and agree that final judgment in any action or proceeding broughtin such courts will be conclusive and may be enforced in any other jurisdictionby suit on the judgment (a certified copy of which will be conclusive evidenceof the judgment) or in any other manner provided by law. Process servedpersonally or by registered or certified mail, return receipt requested, willconstitute adequate service of process in any such action, suit or proceeding. Eachparty irrevocably waives to the fullest extent permitted by applicable law (i)any objection it may have to the laying of venue in any court referred toabove; (ii) any claim that any such action or

 

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proceeding has been brought in an inconvenient forum; and (iii) anyimmunity that it or its assets may have from any suit, execution, attachment(whether provisional or final, in aid of execution, before judgment orotherwise) or other legal process. Notwithstanding the foregoing, either partymay seek equitable relief in order to protect its confidential information orintellectual property at any time, provided it does so in the state or federalcourts in Santa Clara County, California (and only those courts). The partieshereby waive any bond requirements for obtaining equitable relief. Theconfidentiality provisions of the Agreement will be enforceable under theprovisions of the California Uniform Trade Secrets Act, California Civil CodeSection 3426, as amended.

 

15.          Headings

 

The section headings used in the Agreement are used for convenienceonly and are not to be considered in construing or interpreting the Agreement.

 

16.          Severability

 

If a court of competent jurisdiction finds any provision of theAgreement unlawful or unenforceable, that provision will be enforced to themaximum extent permissible so as to effect the intent of the parties, and theremainder of the Agreement will continue in full force and effect.

 

17.          Counterparts

 

The Agreement may be executed in one or more counterparts, each ofwhich will be deemed an original, but which collectively will constitute oneand the same instrument.

 

18.          Amendments

 

Except as specifically provided herein, the Agreement may be modifiedonly by a written amendment referring to the Agreement and signed by authorizedrepresentatives of each party.

 

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IN WITNESS WHEREOF, the Parties have causedtheir duly authorized representatives to execute this Agreement as of theEffective Date.

 

Apple

Micron

 

 

By:

/s/ TIM D. COOK

 

By:

/s/ STEVEN R. APPLETON

 

 

Name:

Tim D. Cook

Name:

Steven R. Appleton

 

 

 

 

Title:

Executive Vice President,

Title:

Chief Executive Officer and President

 

World-Wide Sales and Operations

 

 

 

 

Date:

October 13, 2005

Date:

October 13, 2005

 

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EXHIBIT A

Purchase Commitment, Supply Commitment andContract Price

 

1. Purchase Commitment, Supply Commitment & Contract Price byCalendar Quarter

 

Item

 

Q1

 

Q2

 

Q3

 

Q4

 

2006

Purchase Commitment

 

[***]

 

[***]

 

[***]

 

[***]

Supply Commitment

 

[***]

 

[***]

 

[***]

 

[***]

Contract Price

 

[***]

 

[***]

 

[***]

 

[***]

 

2007

Purchase Commitment

 

[***]

 

[***]

 

[***]

 

[***]

Supply Commitment

 

[***]

 

[***]

 

[***]

 

[***]

Contract Price

 

[***]

 

[***]

 

[***]

 

[***]

 

2008

Purchase Commitment

 

[***]

 

[***]

 

[***]

 

[***]

Supply Commitment

 

[***]

 

[***]

 

[***]

 

[***]

Contract Price

 

[***]

 

[***]

 

[***]

 

[***]

 

2009

Purchase Commitment

 

[***]

 

[***]

 

[***]

 

[***]

Supply Commitment

 

[***]

 

[***]

 

[***]

 

[***]

Contract Price

 

[***]

 

[***]

 

[***]

 

[***]

 

2010

Purchase Commitment

 

[***]

 

[***]

 

[***]

 

[***]

Supply Commitment

 

[***]

 

[***]

 

[***]

 

[***]

Contract Price

 

[***]

 

[***]

 

[***]

 

[***]

 

The Supply Commitment numbers above are in millions of GBs. ContractPrices are for one GB equivalents.

 

2.             Transfers

 

2.1                                 If the allocation ofManufacturer wafer starts between Micron and Intel changes for any reason,Micron shall promptly notify Appleas to the amount of the increase or decrease, and Micron’s Supply Commitment,Apple’s Purchase Commitment, and the Pre-Payment shall decrease or increase, asthe case may be, in a proportionate manner for all calendar quarters of thisAgreement after such change as follows:

 

(a)  Micron’sSupply Commitment shall be revised to equal the [***];

 

(b)  Apple’s Purchase Commitmentshall be revised to equal [***];

 

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2.2                                 If Micron’s SupplyCommitment is reduced, Micron will reimburse Apple the amount of thePre-Payment equal [***]; and

 

2.3                                 If Micron’s SupplyCommitment is increased, Apple shall pay to Micron, as additional Pre-Payment,the amount [***].

 

3.                                      SupplyCommitment Reduction

 

Micron’sobligations with respect to the Supply Commitment will be reduced as follows:

 

3.1                                 The “Percentage Purchased” means thepercentage equal [***].

 

3.2                                 The “Percentage Available” means thelesser of:  [***].

 

3.3                                 The “Purchase Commitment Adjustment”means the percentage equal to [***].

 

3.4                                 The initial “Adjustment Threshold” is [***]%.

 

3.5                                 Subject to Section 3.6below, if the average Purchase Commitment Adjustment for any [***] after [***]is less than the Adjustment Threshold, then Micron may,upon notice to Apple no later than [***] after the end of the [***], reduce theSupply Commitment for all remaining [***] during the term of this Agreement bythe lesser of [***].

 

3.6                                 If the averagePercentage Available for any [***] is less than the Adjustment Threshold andApple has placed P.O.s, in accordance with Section 5.4 of the Agreement, forthe total number of GBs made available for sale by Micron during each of the[***] pursuant to Section 3.1 of the Agreement (or if a notice has beenprovided by Micron pursuant to Section 3.2(a) of the Agreement, the number ofGBs made available for sale pursuant to Section 3.2(a) of the Agreement) thatmeet the conditions set forth in Section 4.2 of the Agreement; and (ii)indicated pursuant to Section 3.3(b) of the Agreement, that Apple would haveordered additional Micron Products in each of such quarters if Micron had mademore GBs available for sale, then the Adjustment Threshold will be reduced forall remaining calendar quarters during the term of this Agreement by [***]%.

 

3.7                                 In no event will theSupply Commitment for any calendar quarter be reduced below [***]% of theoriginal Supply Commitment set forth in Section 1 above for such quarter. In noevent will the Adjustment Threshold be reduced below [***]%.

 

3.8                                 In the event that theSupply Commitment is reduced under this Section 3, Micron will reimburse Apple[***].

 

3.9                                 To facilitate thecalculation of the foregoing, Micron will use reasonable efforts to provideApple with quarterly reports no later than [***] after the end of each calendarquarter, setting forth (i) the basis for calculation of the [***]; and (ii)[***].

 

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3.10                           [***].

 

4.                                      PurchaseCommitment in [***]

 

Micron only plans to make available for sale Micron Products with [***]during the [***], and [***] during [***]. In the event Apple has a need topurchase any GBs of NAND flash products [***], Apple agrees to [***]. Duringsuch period, Apple will provide Micron written notice specifying the number ofGBs of Micron Products it will require at least [***] ([***]) days before therequired delivery date. In the event Micron provides written notice within five(5) business days after Apple’s written notice of the amount of GBs Micron willsupply to Apple, Apple shall, within five (5) business days after Micron’sresponse, place a P.O. in accordance with Section 5.4 of the Agreement for deliveryof the Micron Products specified in such notice, and Micron shall accept suchP.O. in accordance with Section 5.4 of the Agreement. If Micron does notprovide written notice that it is [***] under this Section 4 within five (5)business days after Apple’s written notice, Apple shall be entitled to [***].

 

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EXHIBIT B

 

Pricing Exhibit

 

The price ofMicron Products purchased under this Agreement (the “PurchasePrice”) will be the lesser of: (a) the contract price set forthin Exhibit A for the applicable calendar quarter (the “ContractPrice”); or (b) the Benchmark Price (defined below).

 

1. BenchmarkPrice

 

“Benchmark Price” means, measured ona monthly basis, [***] (i) [***] during such month, [***]; or (ii) the [***]for such month based on the same densities purchased by Apple during such month.If there isn’t a comparable density [***] for a given density purchased byApple, then [***]. Micron may exclude from the Benchmark Price calculationabove [***].

 

The Partieswill mutually agree upon an [***] if: (i) [***] ceases to [***]; (ii) eitherParty has or establishes a [***] in [***]; or (iii) [***] or the [***].

 

2.             Accrued BenchmarkPrice

 

2.1                                 If, at any time MicronProducts are purchased [***], the Accrued Benchmark Price Adjustment (asdefined below and as adjusted in accordance with Section 2.2 below) is [***],then notwithstanding anything to the contrary in Section 6.1 of the Agreement,the price of the Micron Products to be purchased at such time [***]. The [***]will [***] as the Accrued Benchmark Price Adjustment (as adjusted in accordancewith Section 2.2 below) [***], after which the price of Micron Products will bedetermined in accordance with Section 6.1 of the Agreement. The “Accrued Benchmark Price Adjustment”is [***].

 

2.2                                 The Accrued BenchmarkPrice Adjustment will be [***] by the [***]: (i) the [***] and (ii) the [***]. In the event the Accrued BenchmarkPrice Adjustment is [***].

 

3.             Invoice Price

 

Micron will invoice Apple atPurchase Price in effect at the beginning of the calendar quarter (the “Invoice Price”), but will reconcilepricing as follows:

 

At the end of each month during such quarter, Micron will calculate thePurchase Price for that month. If Invoice Price was higher than the PurchasePrice for that month, Micron willrebate the difference between the Invoice Price and the Purchase Price for eachGB invoiced that month to Apple within [***] after the end of that calendarquarter.

 

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EXHIBIT C

 

The percentages shown are percentages ofgigabytes (GB) of output by product density.

 

Density Road Map

 

[***].

 

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EXHIBIT D

 

Micron Products and Apple Products

 

1.                                       “Micron Products” means NAND flashproducts available in packaging and pinouts [***] based on the densitiesavailable in accordance with the density roadmap in Exhibit C, which roadmapmay be modified from time to time by Micron, upon agreement by Apple, whichagreement by Apple shall not be unreasonably withheld or delayed (the “DensityRoad Map”), and other NAND flash products mutually agreed uponby the Parties. Micron willpromptly notify Apple of changes in the NAND flash die densities being producedby the Manufacturer and propose updates to the Density Road Map to reflect suchchanges provided Micron fulfills its obligations under Section 3.2(c).

 

2.                                       “Apple Products” means all productsmanufactured, marketed, sold by or for Apple, or branded or co-branded byApple; provided, however, for purpose of the price and other terms andconditions negotiated under this Agreement for Apple to purchase MicronProducts, a Apple Product shall not mean [***].

 

3.                                       Apple shall not[***] an Micron Product to [***]. In the event Apple desires to [***] MicronProducts to [***] shall have a [***]. Such [***] shall be [***] under thedelivery terms agreed to by the parties. If Micron does not provide writtennotice to Apple [***], then Apple shall be entitled to [***]. If Apple desiresto use Micron Products in a product other than in a Apple Product, the partiesshall negotiate a separate agreement for Apple to purchase such MicronProducts, and such Micron Products shall not be subject to the terms andconditions of this Agreement.

 

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4.                                       If Applerequests that Micron supply [***].

 

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